Finance Minister Nirmala Sitharaman will address the RBI’s central board on February 8 post-budget to coordinate fiscal and monetary strategies to boost GDP growth. The meeting, following the RBI’s monetary policy review, may include an interest rate cut to stimulate growth amid easing inflation. The Finance Minister stays on course for fiscal consolidation, reducing the deficit target to 4.4% of GDP for 2025-26, lessening the need for government borrowing. This grants room for the RBI to implement a looser monetary policy, likely to be emphasized by the Minister. New RBI Governor, Sanjay Malhotra, a former Finance Ministry official, has injected Rs 1.5 lakh crore to ease tight liquidity in the financial sector.
The Finance Minister reduced its net market borrowings estimate for 2025-26 to Rs 11.54 lakh crore, freeing up funds in the banking system for corporate loans, thus boosting investment and consumer spending to spur growth. Fiscal and monetary policies are in sync to drive growth and maintain price stability. The Budget introduces significant income tax cuts for the middle class, exempting 1 crore individuals earning up to Rs 12.75 lakh annually from tax, boosting spending power and aggregate demand for economic growth.
The RBI is expected to maintain liquidity and support fiscal measures to boost economic growth, create jobs, and increase incomes by moderating interest rates.
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