Fiscal, monetary policies must work in tandem: Finance secretary

Finance secretary Tuhin Kanta Pandey on Tuesday said fiscal and monetary policies have to work in tandem and that to have good growth, India needs to get a grip on inflation. Ahead of the meeting of the Reserve Bank of India's Monetary Policy Committee (MPC), he said the government had taken measures to lower the fiscal deficit and delivered a non-inflationary budget, and that the MPC now has to decide on interest rate cuts to boost growth.

"The fiscal policy and the monetary policy need to work in tandem, not at cross purposes... because a lot more benefit will come also with monetary easing, if we are able to maintain inflation control," Pandey said. He added that inflationary policies can only provide short-term growth boosts, whereas sustainable growth requires a firm grip on inflation.

His comments came days ahead of the much-awaited bi-monthly meeting of the monetary policy committee amid anticipation of a rate cut. When asked whether the central bank would cut policy rates, Pandey said, "I think it's a call that MPC will take. They are seized of the situation. They will take a call."


He said the budget announcements were non-inflationary and the government announced the measures in the budget while maintaining fiscal discipline.

The government has projected a fiscal deficit of 4.4% for 2025-26, down from 4.8% in this fiscal.

On rupee depreciation

On industry's concerns about depreciation of the rupee against the US dollar, Pandey said the government and the RBI are monitoring the situation. The rupee fell to a record low of 87.29 per dollar on Monday.

"Both the government and RBI are monitoring the situation... the RBI needs to take a call," Pandey said. He added that while a falling rupee poses a risk to inflation, it adds to export competitiveness.

Pro-growth, pro-people budget

Pandey, who took charge as revenue secretary a few weeks before the budget, said that his team had clear guidance from the PM to make it "a pro-growth, pro-people, pro-taxpayer budget".