Advantages
- Helps in increasing aggregate demand in the economy.
- Results in economic growth.
- Can be used when banks lack sufficient liquidity.
- Avoids increasing interest rates that would hamper investments.
Disadvantages
- Increases debt on the Government.
- Impacts overall macroeconomic stability.
- May result in ratings downgrade.
- Increases inflation due to increased money supply.
- May result in rupee depreciation and capital flight.
- RBI can be seen as losing control over its monetary policy.
- Can lure future governments into an easy route of financing deficits.