More Stories

Informist, Friday, Feb. 7, 2025

 

Please click here to read all liners published on this story

--RBI Malhotra: Budget tax cuts bode well for consumption 
--RBI Malhotra: It was an excellent budget on growth, inflation 
--RBI Malhotra:Budget focus on agri to help control inflation in medium term 
--RBI Malhotra: Budget would have considered fruit, vegetable inflation 
--RBI Malhotra: Income tax cut to not have major impact on inflation 
--RBI Malhotra: Income tax cut will help growth, not impact inflation 

 

NEW DELHI – The much-talked about income tax bonanza announced in the Union Budget for 2025-26 (Apr-Mar) will "only help support growth without having any major impact on inflation," said the Reserve Bank of India Governor Sanjay Malhotra, adding that it bodes well for consumption. "We have sufficient productive capacity and the capacity utilisation levels are 75%," he said at the post-policy press conference.

 

A key takeaway from Finance Minister Nirmala Sitharaman's eighth Budget was the hike in the tax rebate limit to INR 1.2 million, effectively meaning that individuals with income of up to INR 1.2 million per year will be entirely exempted from paying income tax.

 

This move--aimed at increasing disposable income in the hands of taxpayers to spur demand--will lead to the government foregoing revenues to the tune of INR 1 trillion, which it hopes will come back to the system in the form of savings, investments and consumption. The income tax cut "was desired, everyone was wanting it" and so questions about its inflationary nature are not "really apt", said Malhotra, who was previously the revenue secretary in the finance ministry. 

 

In a post-Budget interview with Informist on Sunday, Finance Secretary Tuhin Kanta Pandey said that the government took the "non-inflationary" route of income tax cuts to offer much-needed impetus to the economy, in order to give room to the central bank to lower interest rates. On expected lines, the RBI's rate setting panel on Friday lowered the repo rate by 25 basis points to 6.25%, marking the first rate cut in nearly five years. "Overall, it was an excellent budget, both from a growth and inflation perspective," Malhotra said. 

 

The governor noted that he was "especially pleased" to see the Budget's focus on easing the price pressures of vegetables, fruits and pulses through the various announcements made on Saturday. About 46% of the CPI basket comprises food and a "prime focus" on agriculture "will not only help growth, but in the medium to long term, also help us in controlling inflation," he said. 

 

Food prices have been at the heart of the central bank's inflation management issues. While Malhotra said that he was not "privy to the government's thinking" regarding the measures announced in the Budget, he said that the announced 'Mission for Aatmanirbharta in Pulses' and 'Comprehensive Programme for Vegetables and Fruits' must be owing to the role that these commodities play in inflation management.

 

On Saturday, Sitharaman announced the six-year 'Mission for Aatmanirbharta in Pulses' with special focus on tur, urad and masoor. In this, the government will improve post-harvest storage and management while also assuring remunerative prices to the farmers. The 'Comprehensive Programme for Vegetables and Fruits' on the other hand, will promote production, efficient supplies, processing, and remunerative prices for farmers, in partnership with states.   End

 

Reported by Priyasmita Dutta

Edited by Akul Nishant Akhoury

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2025. All rights reserved.