Finance Minister Nirmala Sitharaman on Saturday said she expect durable recovery in consumption helped by both fiscal and monetary policy measures. At the same time, Governor of the Reserve Bank of India, Sanjay Malhotra said that the central bank would be will be watchful of any depreciation of rupee that leads to inflation
Sitharaman and Malhotra were talking to media after post budget board meeting of the RBI. Earlier, Sitharaman along with all the Secretaries and the Chief Economic Advisor addressed the central board of RBI. In her address, she outlined the vision of the Union Budget 2025-26, its key focus areas and the expectations from the financial sector. The Finance Minister also underscored Budget’s commitment to prudent fiscal management and policies designed to foster growth, with the overarching goal of achieving ‘Viksit Bharat’.
Sitharaman expressed optimism about a recovery in private sector investment. “The input we have received since the Budget is that orders for FMCG in the April-June quarter are already getting booked, and industry is seeing signs of a possible consumption recovery,” she said, adding that investment decisions were being shaped by these early triggers.
She also underscored the government’s commitment to making India more investor- and trade-friendly while ensuring tariff protection for MSMEs when needed.
Commenting on the coordination between the government and the Reserve Bank of India, Sitharaman reiterated that fiscal and monetary policies were aligned. “Whether it is inflation or growth, monetary policy and fiscal policy work together, and government-RBI coordination is needed,” she said.
Replying to a question, Finance Minister Sitharaman said the Union Cabinet has cleared the new income tax proposal and she hopes to have it introduced in the Lok Sabha in the coming week. Thereafter it will be sent to a parliamentary standing committee.
What RBI Governor said?
When asked about impact of depreciating rupee on headline inflation, Malhotra said: “We are alert to all pressures on inflation, will be watchful of any depreciation of rupee that leads to inflation.” He also said 5 per cent depreciation impacts domestic inflation to the extent of 30-35 bps.
Rupee has depreciated over 2 per cent in the current calendar year so far. “Most of the rupee’s depreciation is due to Trump related tariff announcements and global uncertainties. So hopefully that should settle down and help us with downward movement on rupee,” Malhotra said.
He emphasised that the market forces decide the value of rupee with respect to the US dollar and the central bank is not worried about day-to-day movement of the currency value. “There is no change in approach on rupee, we don’t target a price level or band for rupee. We only step in when there is excessive volatility. We trust our market’s efficiency and depend on them to decide on the level of rupee.”
He assured that central bank will be agile in responding to the liquidity needs of the banking system, “We will be very, very watchful, alert and very nimble and agile in whatever are the requirements of the banking system to provide liquidity, both transient, overnight, as well as more durable liquidity,” he said.