Abstract
In India, traditionally, a large component of government’s debt was incurred at low rates of interest. High debt countries may face the risk of crisis of self-fulfilling debt. Throughout the world, debt management is distinct from monetary management. The establishment of Debt Management Office (DMO) has been a topic of debate for quite some time. By separating the debt from monetary management, policy makers expect the central bank to emerge as a bank which focuses mainly on controlling inflation. Establishment of a DMO may consolidate all debt management functions in a single agency. However, it may be difficult to rely upon such an independent agency new to the scene of debt management in times of crisis.
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