Finance Minister Nirmala Sitharaman on Saturday expressed confidence that the government and the Reserve Bank of India will continue to work in coordination to ensure that fiscal and monetary policies work effectively to address issues around inflation and growth.
Monetary policy and fiscal policy should work in tandem like the wheels of a car in coordination, which will ensure public good, the finance minister said responding to a question after addressing the Central Board of Directors of the Reserve Bank of India in the customary post-budget meeting. RBI Governor Sanjay Malhotra and Minister of State for Finance Pankaj Chaudhary were also present.
The Monetary Policy Committee of the RBI cut the repo rate by 25 basis points on Friday in a move that is seen to boost consumption demand and came soon after the tax cuts announced in the Union Budget that are expected to also push up demand.
The finance minister underlined that coordination between the RBI and the government is always required and underlined that this also helped the Indian economy to not be impacted by the Covid 19 pandemic.
The minister also expressed hope that the measures announced in the Budget along with the repo rate cut would help in a durable recovery of private investments. She said that anecdotal evidence based on her discussions with industry representative suggest that orders for fast moving consumer goods are getting booked in the April to June quarter. The industry is seeing signs of a consumption recovery and is looking at reviving capacity utilisation.
“I see it as a positive sign and with the decision of the RBI to cut the report rate by 25bps, it can serve as the required traction,” the FM said.
Addressing the media, RBI Governor Sanjay Malhotra also expressed hope that the repo rate cut will help boost consumption and said that the RBI is alert to all pressures on inflation and said that most of the depreciation in the rupee is due to global uncertainty. “Hopefully that should settle down and help in the downward movement of inflation,” he said. As per RBI estimates, 5% depreciation of the rupee leads to a 35 basis point impact on inflation.
For FY26, the RBI has estimated the rupee at an average $87 against the US dollar. “The RBI is not targeting any price level or band for the rupee but will only stem excessive volatility,” he said.
Meanwhile, the finance minister also said that she hopes to introduce the new Income Tax Bill in Parliament in the coming week. The bill, which seeks to simplify the current Income Tax Act, 1961 was cleared by the Union Cabinet on February 7.
While declining to give a timeline for when the new Act will be rolled out, the minister noted that it has to go through several stages before being passed by Parliament. She noted that the Bill will be sent to the Standing Committee after being introduced and then the Cabinet will take a call on any further amendments based on the panel’s recommendations.
When asked on her reaction on the Delhi election results that show that the BJP is leading in a majority of seats, the FM said, “…happy to know. Under the leadership of Prime Minister Narendra Modi, India’s national capital should have a government ready to serve its people,” she said.