Synopsis
Finance Minister Nirmala Sitharaman is set for a post-budget meeting with RBI officials on February 8 to discuss fiscal and monetary measures aimed at boosting GDP growth, including interest rate adjustments and tax cuts for the middle class.Key Takeaways
- Post-budget meeting scheduled for February 8.
- RBI may cut interest rates for growth.
- Fiscal deficit target reduced to 4.4% for 2025-26.
- Injection of Rs 1.5 lakh crore into banking system.
- Income tax cuts for 1 crore middle-class individuals.
New Delhi, Feb 3 (NationPress) Finance Minister Nirmala Sitharaman is set to meet with the Reserve Bank of India's central board on February 8 for a post-budget discussion aimed at aligning fiscal and monetary strategies to boost GDP growth.
This traditional meeting will occur just after the RBI reveals its monetary policy review, with speculation that it may reduce interest rates for the first time in five years to invigorate growth, as inflation rates have decreased.
The Finance Minister has opted to remain on the path of fiscal consolidation, lowering the fiscal deficit target to 4.4 percent of GDP for 2025-26 from the previous 4.8 percent, thus minimizing the need for government market borrowing.
This adjustment creates additional space for the RBI to implement a softer monetary policy to foster growth, a point the Finance Minister is likely to emphasize during the meeting. The new RBI Governor, Sanjay Malhotra, a former official from the Finance Ministry, has already declared an injection of Rs 1.5 lakh crore into the banking sector due to tightening liquidity conditions.
Additionally, the Finance Minister has decreased the net market borrowing estimate for the fiscal year 2025-26 to Rs 11.54 lakh crore, which will allow more funds in the banking system for corporate loans, stimulating demand through consumer spending to promote growth.
As per senior officials, the fiscal initiatives from the budget and the RBI's monetary policy will be synchronized to enhance growth while maintaining price stability.
The Budget has introduced substantial income tax reductions for the middle class, enabling 1 crore individuals earning up to Rs 12.75 lakh annually to pay no taxes, thus increasing disposable income for spending on goods and services. This will contribute to a rise in aggregate demand, further boosting growth.
The RBI is anticipated to maintain sufficient liquidity in the economy and moderate interest rates to support the fiscal measures in the Budget, thereby accelerating economic growth and generating additional jobs and incomes.
