SRINAGAR: The government has approved the Reserve Bank of India’s proposal to introduce one billion polymer banknotes each in the Rs 10 and Rs 20 denominations for field trials, Parliament was informed on Tuesday.
Finance Minister Nirmala Sitharaman, in a written reply to the Rajya Sabha, said the RBI had submitted the proposal following a recommendation from its central board under Section 25 of the Reserve Bank of India Act, 1934.
The proposal covers field trials of the two denominations and their regular issuance if the trials are successful. The polymer notes would be circulated alongside existing paper substrate-based banknotes, according to the RBI.
Sitharaman said the procurement process was currently at an initial stage, making it too early to specify when the polymer notes would be introduced or how much the exercise would cost.
Replying to a separate question, the Finance Minister said average retail inflation, based on the Consumer Price Index, fell from 5.4 per cent in 2023-24 to 4.6 per cent in 2024-25 and 2.1 per cent in 2025-26.
Inflation, however, increased to 3.9 per cent in the first quarter of 2026-27 amid higher global energy and commodity prices linked to the West Asia crisis, seasonal increases in vegetable prices and the prospect of unfavourable El Niño conditions. Sitharaman said the rate remained below the RBI’s 4 per cent inflation target.
She also outlined measures taken by the government to contain price pressures and support household consumption.
The 56th GST Council meeting introduced a revised structure comprising an 18 per cent standard rate, a 5 per cent merit rate and a 40 per cent special de-merit rate for a limited set of goods and services. The 40 per cent rate includes the earlier compensation cess, with the government stating that there was no increase in the overall tax burden.
The changes resulted in several goods and services moving from the 28 per cent slab to 18 per cent, while others were shifted from 18 per cent to 12 or 5 per cent and from 12 per cent to 5 per cent or nil.
The government also rationalised Basic Customs Duty on several goods from February 2, 2026, as part of measures aimed at lowering input costs, encouraging domestic manufacturing, improving export competitiveness and supporting strategic sectors.
Other measures cited by the minister included lower BCD on crude palm oil, crude soybean oil and crude sunflower oil, a reduction in the Agriculture Infrastructure and Development Cess on masur, and a Rs 10-per-litre cut in central excise duty on petrol and diesel in March 2026.
Sitharaman said disposable incomes had also been raised by exempting annual income up to ₹12 lakh from income tax, with the threshold effectively reaching Rs 12.75 lakh for salaried individuals after the standard deduction.
According to the latest GDP estimates of the Ministry of Statistics and Programme Implementation, per capita private final consumption expenditure grew 6.8 per cent in 2025-26, compared with 4.8 per cent in 2023-24. The share of private final consumption expenditure in GDP remained broadly stable at 56.5-56.7 per cent, based on the 2022-23 base year.
The minister said the government continued to monitor price movements and would take fiscal, administrative and supply-side measures as required to protect household purchasing power, particularly among low- and middle-income groups.
