Finance Minister Nirmala Sitharaman is set to meet with the Reserve Bank of India’s (RBI) central board on February 8, following the recent Budget announcement.
This post-budget meeting is crucial for coordinating the fiscal and monetary policies aimed at accelerating the country’s GDP growth.
The meeting will take place one day after the RBI’s monetary policy review, where market experts anticipate a rate cut. This would be the first reduction in interest rates in five years, motivated by the recent decline in inflation.
The decision to reduce the fiscal deficit target for 2025-26, from 4.8 per cent to 4.4 per cent of the GDP, reflects the government’s commitment to fiscal consolidation, which in turn reduces the need for extensive market borrowing.
This allows the RBI greater room to implement a softer monetary policy to promote growth, a point that Sitharaman is expected to emphasise during the meeting.
The newly appointed RBI Governor, Sanjay Malhotra, a former official from the Finance Ministry, has already taken steps to ease liquidity constraints in the banking system by injecting Rs 1.5 lakh crore.
This intervention is designed to alleviate the tight liquidity situation in the financial sector. Sitharaman, in her role, has also reduced the government’s net market borrowing estimate for 2025-26 to Rs 11.54 lakh crore, ensuring that more funds remain within the banking system.
This move will make it easier for banks to lend to corporates for investment and for consumers to spend, thus helping stimulate economic demand.
Senior officials have indicated that the fiscal measures outlined in the Budget, coupled with the RBI’s expected monetary policy adjustments, will align to stimulate growth while maintaining price stability. A key measure in the Budget involves substantial income tax cuts for the middle class.
These cuts will benefit one crore individuals earning up to Rs 12.75 lakh per year, who will now have more disposable income to spend on goods and services. This increase in consumer spending is expected to contribute significantly to the overall demand in the economy, providing a boost to growth.
The RBI is expected to support these fiscal measures by ensuring adequate liquidity in the system and moderating interest rates. These actions, combined with the government’s economic strategy, aim to accelerate the country’s growth rate, generate more jobs, and increase incomes.
The combined effect of these fiscal and monetary policies will play a crucial role in propelling the economy forward in the coming year.
In essence, the February 8 meeting between the Finance Minister and the RBI’s central board will be a pivotal moment in determining the country’s economic trajectory.
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