Made budget. Now for RBI.

Mumbai: Finance Minister Nirmala Sitarman after a consumption and support BudgetThe ball is now in the Reserve Bank of India (RBI) court, which is pushing the last mile to push the final-mile with a cut in the next week.

Most economists believe that the budget has set a platform for the rate cut by keeping the fiscal deficit under control.

“The budget does not add any pressure to pursue inflation. It is expected to carry forward the demand to fulfill the additional capacity already in a good place of the consumer, ”said Madan Sabnavis, the chief economist of the Bank of Baroda.

Government announced income tax relief by earning persons on Saturday 12 lakhs annually by paying income tax. Increase in standard deduction is expected to strengthen their spending power and strengthen the demand for fuel for consumer goods, automobiles and housing.

Separately, the government has also revised the target of fiscal deficit for the current financial year from 4.9% to 4.8%. The fY26 fiscal deficit is now estimated at 4.4%, in line with the fiscal consolving plan to reduce the GDP by 4.5% of GDP by next year.

However, some economists now hope that the RBI will have to lift heavily in terms of cutting a rate because the burden of support development has now shifted to the central bank. While the budget puts money in the hands of the public, the increase in revenue and capital expenditure remains TEPID.

Rate cut expectations increase

Economists hope that the RBI cut the repo rate in the repo rate on 7 February when the Monetary Policy Committee completes its review. This will be the first rate cut in more than four years.

“It may seem that Prima Facial Government is taxing tax, but it cannot produce very strong multiplier effects on budget development, given the consolidation of deficit.”

According to HSBC, “GDP fiscal consolidation in FY 26 is likely to provide a negative fiscal impulse on the 0.4% economy. However, the task of raising development is likely to be passed on the RBI. With inflation falling, the space has opened for rate cuts and easy liquidity. We expect a 25bp rate cut at the 7 February meeting, followed by one and one repo rate in April to 6%. ,

In the last few days, RBI has injecting large-scale liquidity in the banking system through various devices like Open Market Operation (OMO), Variable Repo Rate (VRR) and Dollar-Rupay Cell Swap, injecting the liquidity in the banking system, the rate cut next week next week Established the platform for.

However, some economists believe that inflation pressure for MPC is still high to allow any rate cut next week. The retail inflation rate measured by the Consumer Price Index (CPI) for December was 5.22%above a medium target of 4%.

The Indian Meteorological Department (IMD) on Friday estimated temperatures in North India that in February, it is estimated to be hotter than normal as well as normal. It is likely to damage fruits and vegetables along with standing wheat crop. Along with currency and tight liquidity, these economists believe that RBI has to face difficult options in the upcoming policy.

“While both central and state budgets include the provision of consumption support through tax deduction and cash handout, respectively, MPC must be appropriately confident about the alignment of inflation with the target, a goal that yet Later is achieved. , With signs of perseverance of normal temperature and exchange rate risks above, we are still unresolved, we continue to expect from MPC to maintain the status quo in its upcoming policy review in February -24. However, the steps to reduce liquidity can be continued in a calibrated manner to ensure that neutral policy stance is strong in behavior, ”said Vivek Kumar, Economist, Quantco Research.

The Economic Survey hopes that food inflation will be cooled in the fourth quarter ending March, which is inspired by good Rabi production as well as vegetable prices and the arrival of kharif crop. RBI FY25 sees inflation 4.8%.