By bigbreakingwire 
India’s economy has regained its lost momentum, and consumption demand is expected to improve due to easing inflation and tax benefits, according to the Reserve Bank of India’s latest monthly bulletin. The central bank highlighted that government policies and fiscal strategies are playing a key role in sustaining growth while ensuring financial stability.
Fiscal Policy Balances Growth and Stability
RBI noted that the government’s budget successfully balances the need for fiscal consolidation with economic expansion. A strong emphasis on capital expenditure, combined with measures to boost consumption, is expected to accelerate growth. In particular, tax relief and increased infrastructure spending are likely to enhance disposable incomes and support demand.
Rising Consumption and Rural-Urban Demand
Both rural and urban consumption are poised for recovery. In rural areas, the robust performance of the agriculture sector is expected to drive demand, while urban spending is likely to improve due to higher disposable incomes and tax concessions. These factors could lead to a broad-based pickup in economic activity, supporting overall growth.
Liquidity Challenges in the Banking System
On financial liquidity, the RBI pointed out that while several measures have been introduced—such as open market operations and variable rate repo auctions—to inject funds into the system, liquidity remains unevenly distributed. Despite an overall liquidity deficit, some banks continue to park funds under the standing deposit facility instead of lending in the uncollateralized call money market, reflecting hesitancy in interbank lending.
Global Economic Risks and Inflation Concerns
The RBI also warned that global trade policies could add to inflationary pressures and create market turbulence. The final phase of bringing inflation under control may prove difficult in such an environment, possibly requiring central banks to adjust their policies. Given these uncertainties, India’s central bank remains watchful, prepared to take necessary steps to maintain economic stability.
RBI Injects ₹43.2 Lakh Crore to Boost Liquidity Under Sanjay Malhotra
Since Sanjay Malhotra took charge, the Reserve Bank of India has infused ₹43.2 lakh crore into the banking system to improve liquidity, as per RBI data. This includes ₹16.4 lakh crore through repo auctions and ₹25.8 lakh crore via daily repo auctions to address short-term funding needs.
Additionally, the RBI has injected ₹60,000 crore by purchasing government securities and ₹45,000 crore through currency swap auctions. These measures aim to ensure adequate liquidity in the financial system and support economic stability.
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[…] RBI Sees India’s Economic Recovery Strengthening Amid Policy Support […]
[…] India’s economy has regained momentum, with consumption demand expected to rise as inflation eases and tax benefits take effect, according to the Reserve Bank of India’s latest monthly bulletin. The central bank emphasized that government policies and fiscal measures are crucial in maintaining growth and financial stability. […]