The rate cut effected by RBI’s MPC, along with Centre’s income tax relief measures announced in the Union Budget will boost consumption in the coming fiscal, according to economists.
The central bank on February 7 delivered its first rate cut in five years, projecting inflation to trend lower to within the RBI target of 4 percent, and economic activity to gather pace.
“Already, fiscal policy support has been announced through the Budget for consumption demand through additional disposable income, and investment demand through augmented effective capital expenditure. Now, monetary policy would also support consumption and private investment demand,” an tax expert said.
He said the fall in real interest rate is also expected to help investment. “The private sector would also be induced to undertake higher investments with a reduced cost of borrowing and with the expectation that it may be reduced further,” he added.
