Reserve Bank of India Governor Sanjay Malhotra.
On February 1, the announcement made by the Finance Minister to make tax free of income up to Rs 12 lakh in budget 2025-26 made a lot of headlines. Reserve Bank of India Governor Sanjay Malhotra also appreciated the Union Budget on Friday and described it as excellent. On the occasion of the announcement of monetary review policy, he said that this budget will help in the main objective of reducing inflation along with economic development. According to PTI news, Malhotra, who held the post of Governor of RBI in December, also said that tax relief of Rs 1 lakh crore given to the middle class to promote consumption will not have any major impact on inflation.
Reduced fiscal deficit at 4.4 percent
According to the news, Malhotra said after announcing a 0.25 percent repo rate cut, it is the first such step made by RBI in five years. The governor said that the government has reduced the fiscal deficit at 4.4 percent, which is better than 4.5 percent under the fiscal glide path declared earlier. Malhotra said that proposals on vegetables, fruits and pulses through dedicated programs will help reduce inflation over medium to longer periods.
Food prices share in inflation
About 46 percent of the consumer price inflation is of food prices. Malhotra said that CPI has 6 percent weight in the price of vegetables, while 2.5 percent of fruits and 2.9 percent of pulses. The budget targets items that have more than 11 percent weight in CPI. When asked about the inflation effect of tax relief of Rs 1 lakh crore declared in the budget, Malhotra said that it would not have any impact on inflation and said that there is sufficient production capacity to meet the increased consumption. .
All factors including budget provisions were considered
Malhotra said that the Monetary Policy Committee considered all factors including budget provisions while announcing a reduction of 0.25 percent in the repo rate. Earlier, Malhotra had said to keep in mind the cost of regulation while making necessary rules due to financial stability concerns. It was also said that the RBI is reviewing the economic capital structure internally, which determines the upper limit of the surplus that can be transferred to the government.
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