Fiscal, monetary steps to help boost consumption, says Finance minister Nirmala Sitharaman

NEW DELHI: Finance minister Nirmala Sitharaman said Saturday that coordinated fiscal and monetary actions by govt and RBI will help boost consumption and there are initial signs of a good order book for the first quarter of the next fiscal year, which will help boost private investment.
“After the budget, the few inputs I have received from some business leaders is that the orders for fast-moving consumer goods for April-June are already getting booked, and the industry is clearly seeing signs of a possible recovery of consumption,” she told reporters after addressing the RBI board.

As a result, many companies are looking at reviewing their capacity utilisation, she said, adding that the triggers for a consumption-driven cycle are clearly being felt by those who have to decide on investments.
“So, I see this as a positive sign and with yesterday’s (Friday’s) decision of RBI, together things can move in alignment and the required traction we made in this course,” FM said, while promising to work in coordination with the central bank just as was the case even during Covid-19.
In the budget, FM announced income tax relief of Rs 1 lakh crore, while on Friday, RBI cut repo rates by 25 basis points, a first in five years.
With the rupee weakening against the dollar and the central bank ending up sucking out liquidity as it sought to guard against excessive volatility, RBI governor Sanjay Malhotra sought to assure market players saying that it would be “watchful and agile” in responding to the requirements and will “use all tools available”.
“We will be very, very watchful, alert and very nimble and agile in whatever are the requirements of the banking system to provide liquidity, both transient, overnight, as well as more durable liquidity,” he said.
The governor said a large part of the depreciation of the rupee was driven by global uncertainty, especially US President Donald Trump’s stand, and that should be out of the way soon. “Hopefully that should settle down and that should help us in the downward movement of inflation,” he said.
He also made it clear that there was no change in the policy on exchange rate and that RBI is not targeting any price band for the rupee and focusing on curbing excess volatility. While assuming the exchange rate at 87 to a dollar, Malhotra said that a 5% depreciation in the rupee resulted in a 30-35 basis point inflation in the domestic market and added that RBI had factored it into its calculations.