New Reserve Bank Governor Sanjay Malhotra on Friday lauded the Union Budget for FY26 as "excellent", which will help in economic growth as well as in the central bank's core objective of curtailing inflation.
Malhotra, a career bureaucrat who took over as the Governor of RBI in December, also said that the Rs 1 trillion of tax relief given to the middle class to spur consumption will not have any major impact on inflation."Overall, it is an excellent budget both from a growth perspective as well as from an inflation perspective," Malhotra told reporters hours after announcing a 0.25 per cent repo rate cut, the first such move by the RBI in five years.
He said the government has curtailed the fiscal deficit at 4.4 per cent, which is better than the 4.5 per cent under the earlier announced fiscal glide path.
Malhotra said the proposals on vegetables, fruits and pulses through dedicated programmes will help curb inflation in the medium to long term.
He explained that about 46 per cent of the consumer price inflation is food prices, and reminded that it is an increase in prices on this front that has impacted the headline numbers which have been blamed for the RBI not delivering on the growth-enhancing rate cut for so long.
Price of vegetables has a 6 per cent weight in CPI, while that of fruits has 2.5 per cent and pulses 2.9 per cent, Malhotra said, adding that the budget targets items which have over 11 per cent weight in the CPI.
Asked about the inflationary impact of the Rs 1 trillion tax relief announced in the budget, Malhotra said it will not have any upward impact on inflation and added that there is sufficient production capacity to serve the increased consumption.
The monetary policy committee considered all the factors, including the budget provisions, while announcing the 0.25 per cent cut in repo rate, he added.
Earlier, Malhotra had spoken about taking into account the cost of regulation while making rules which might be necessitated out of financial stability concerns.
He also said that the RBI is internally reviewing the economic capital framework, which dictates the upper limits on the surpluses that can be transferred to the government.
