RBI Chief praises budget: Tax relief won't inflate prices, says Sanjay Malhotra

In his recent address following the Monetary Policy Committee (MPC) meeting, RBI Governor Sanjay Malhotra expressed optimism about the Indian economy, highlighting the positive implications of the FY26 Union Budget. He emphasized that the Rs 1 trillion tax relief for the middle class is unlikely to fuel inflation and will instead bolster consumption. RBI Governor, Sanjay Malhotra, inflation control, economic growth, Union Budget FY26, tax relief, repo rate cut, monetary policy, fiscal deficit, consumer price index, food prices, economic trajectory, financial stability, liquidity management, growth aspirations, agriculture programs, macroeconomic conditions, inflation targets, RBI policies, budget impact.

Positive Outlook on Economic Growth

Sanjay Malhotra lauded the Union Budget for FY26 as "excellent," noting its potential to stimulate economic growth while maintaining a focus on curbing inflation. He stated that the government's efforts to reduce the fiscal deficit to 4.4% are commendable and better than previous projections. Malhotra emphasized that the budget's provisions targeting food items will help manage inflation in the medium to long term.

Tax Relief's Minimal Impact on Inflation

Addressing concerns about the Rs 1 trillion tax relief provided to the middle class, Malhotra assured that it would not exert upward pressure on inflation. He explained that sufficient production capacity exists to meet the anticipated increase in consumption. With food prices constituting a significant portion of consumer price inflation—46%—the governor highlighted that measures aimed at stabilizing food prices will be crucial in managing overall inflation rates.

Repo Rate Cut and Future Projections

The RBI's recent decision to cut the repo rate by 25 basis points marks its first reduction in five years and reflects a proactive approach to fostering growth in light of declining inflation. Malhotra noted that this monetary policy decision was made with careful consideration of the budgetary provisions and their implications for economic stability. Looking ahead, he expressed confidence that India could achieve a growth rate of 7% or more, aligning with national aspirations for economic development while maintaining price stability.