Finance Minister Nirmala Sitharaman on Saturday expressed optimism about a durable recovery in consumption, driven by fiscal and monetary policy measures. Meanwhile, Reserve Bank of India (RBI) Governor Sanjay Malhotra emphasized the central bank's vigilance against any depreciation of the rupee that could fuel inflation.
The remarks came after the post-Budget board meeting of the RBI, where Sitharaman, accompanied by key officials including all Secretaries and the Chief Economic Advisor, elaborated on the Union Budget 2025-26. She outlined the Budget's core vision, highlighting its commitment to prudent fiscal management and growth-oriented policies aimed at achieving 'Viksit Bharat'.
Signs of Consumption Recovery & Private Sector Investment
Sitharaman noted early signs of economic revival, particularly in the private sector. "The input we have received since the Budget indicates that orders for FMCG in the April-June quarter are already being booked, and the industry is witnessing signs of a potential consumption recovery," she said. She further emphasized that these trends were encouraging investment decisions across various sectors.
The Finance Minister also reiterated the government's dedication to fostering an investor- and trade-friendly environment while ensuring tariff protection for MSMEs when necessary.
Fiscal-Monetary Coordination for Economic Stability
Addressing the synergy between fiscal and monetary policies, Sitharaman underscored the collaborative role of the government and the RBI. "Whether it is inflation or growth, monetary policy and fiscal policy work together. Government-RBI coordination is essential for economic stability," she stated.
On the legislative front, she confirmed that the Union Cabinet has approved the new income tax proposal, which is expected to be introduced in the Lok Sabha in the coming week before being referred to a parliamentary standing committee.
RBI's Stance on Rupee Depreciation and Inflation Risks
RBI Governor Sanjay Malhotra, responding to concerns about the rupee's depreciation, assured that the central bank remains vigilant. "We are alert to all pressures on inflation and will closely monitor any depreciation of the rupee that contributes to inflation," he said. He highlighted that a 5 per cent depreciation of the rupee could impact domestic inflation by approximately 30-35 basis points.
The rupee has weakened over 2 per cent in the current calendar year, with Malhotra attributing this largely to global uncertainties and tariff announcements by former US President Donald Trump. "Most of the rupee's depreciation is due to Trump-related tariff announcements and global uncertainties. We expect this to stabilize soon, aiding in a downward movement of the rupee," he added.
Malhotra clarified that the RBI does not target a specific exchange rate but intervenes only in cases of excessive volatility. "The market determines the value of the rupee. We step in only when necessary to ensure stability," he said.
Ensuring Liquidity for the Banking System
The RBI Governor also reassured that the central bank would remain agile in responding to the liquidity needs of the banking sector. "We will be very watchful, alert, and nimble in addressing the liquidity requirements of the banking system, whether transient, overnight, or more durable," he affirmed.
With the Budget setting a clear roadmap for economic resilience and the RBI committed to managing inflation and currency stability, the government and the central bank appear aligned in their efforts to drive India's economic growth.
Text of the Official Press Release is as follows
The 613th meeting of the Central Board of Directors of the Reserve Bank of India was held today at New Delhi under the Chairmanship of Shri Sanjay Malhotra, Governor. The Board reviewed the global and domestic economic situation and outlook, including the challenges posed by geopolitical developments and global financial market volatility. The Board also passed a condolence resolution in memory of Dr. Manmohan Singh, former Prime Minister, former Union Finance Minister and former Governor of the Bank.
Smt. Nirmala Sitharaman, Hon'ble Union Minister of Finance and Corporate Affairs, addressed and interacted with the Directors of the Central Board, after the Board meeting. The Hon'ble Finance Minister in her address 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'. The Directors commended the Finance Minister on the Budget and shared their insights.
The Union Finance Minister was accompanied by Shri Pankaj Chaudhary, Hon'ble Minister of State for Finance; Shri Tuhin Kanta Pandey, Finance Secretary and Secretary, Department of Revenue; Dr. Manoj Govil, Secretary, Department of Expenditure; Dr. Arunish Chawla, Secretary, Department of Investment and Public Asset Management; and Dr. V. Anantha Nageswaran, Chief Economic Advisor.
Deputy Governors Shri M. Rajeshwar Rao, Shri T. Rabi Sankar, Shri Swaminathan J. and other Directors of the Central Board – Shri Satish K. Marathe, Shri S. Gurumurthy, Smt. Revathy Iyer, Prof. Sachin Chaturvedi, Shri Venu Srinivasan, Shri Pankaj Ramanbhai Patel and Dr. Ravindra H. Dholakia – attended the meeting. Shri Ajay Seth, Secretary, Department of Economic Affairs, and Shri Nagaraju Maddirala, Secretary, Department of Financial Services, also attended the meeting.
CAclubindia
