You are right; that is exactly what the RBI has stated also in its policy note announced on December 05. Fiscal measures include cutting of taxes and increasing public spending, which are intended to boost growth. To an extent, the RBI Monetary Policy took the financial markets by surprise as the RBI opted to keep status quo on repo rates. That is because the markets were expecting a rate cut of 25 bps. While the RBI did maintain its stance at accommodative, there was consensus among the six members of the Monetary Policy Committee (MPC) to hold repo rates at 5.15%. What was more interesting was that the MPC included inflation as a key criterion for the future direction of rates. In the last few policy statements, the MPC had purely focused only on the aspect of boosting GDP growth. That marks a distinct shift for the RBI.

The RBI also gave an indication that rate cuts alone would not be enough to boost growth. Fiscal measures like cuts in personal tax rates, corporate tax rate cut, incentives for new manufacturing etc have already been announced. The full impact of these measures would only be visible in the next two quarters. Also, the Union Budget will be presented before the next policy and that could give a better fiscal framework for the RBI to decide on rates trajectory. It is important to note that repo rates are already at the lowest levels since 2003. That surely limits further cuts. So, a lot of factors came in here. It was high inflation, it was too low rates and it was the fiscal boost too.