InvestorQ : Did the income tax sops announced in the budget also force the RBI policy not to cut rates?
Niti Shenoi made post

Did the income tax sops announced in the budget also force the RBI policy not to cut rates?

Answer
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Rashi Mehra answered.
8 months ago


To an extent, you are right. One of the underlying themes of RBI policy in the recent past has been to let fiscal policy take over. With rates having been cut by 135 bps last year and only partial transmission done, this was the logical step. The Budget announced on February 01st has made some changes to the tax structure with a view to put more money in the hands of the lower and middle income class. The argument is that this would be more instrumental in fuelling growth in GDP rather than interest rate cuts. That is the key to the RBI policy this time around.