New Delhi, Feb 4 (PTI) – The government has taken decisive steps to reduce the fiscal deficit and deliver a non-inflationary Budget, leaving it to the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) to determine the course of interest rates, Finance Secretary
Tuhin Kanta Pandey said on Tuesday.
Speaking at an
Assocham post-Budget interaction, Pandey emphasized the need for fiscal and monetary policies to work in tandem to maximize economic benefits while maintaining inflation control.
"The fiscal policy and the monetary policy need to work in tandem, not at cross purposes … Because a lot more benefit will come also with monetary easing, if we are able to maintain inflation control,"he stated.
Fiscal Deficit Target and Policy Coordination
The
Union Budget for FY26 has set a
fiscal deficit target of 4.4% of GDP, down from
4.8% for FY25, demonstrating the government's commitment to fiscal consolidation.
"It's very important to be clear (about) what we have to do within a certain fiscal regime. And, to that extent, we have aided the monetary authorities," Pandey added.
RBI's MPC Meeting and Rate Cut Possibility
The
MPC of the RBI is set to begin its
three-day meeting on February 5, with its policy decision announcement scheduled for
February 7.
When asked about the possibility of a
policy rate cut, Pandey stated that the decision rests with the MPC.
"I think it's a call that MPC will take. They are seized of the situation. They will take a call," he remarked.
Impact of Rupee Depreciation on Inflation
On concerns regarding
rupee depreciation and its potential inflationary impact, Pandey acknowledged that currency weakening could contribute to
imported inflation. However, he also pointed out that
a weaker rupee enhances export competitiveness, which could benefit certain sectors of the economy.
Outlook
With fiscal measures in place, the onus now lies on the
RBI’s monetary policy stance, which could influence
growth, inflation trajectory, and borrowing costs. Markets and investors will keenly watch the
MPC’s decision on February 7, especially in light of global economic uncertainties and domestic inflation dynamics.
