RBI receives approval for field trials of plastic banknotes worth 10 and 20 rupees

The government has approved the issuance of one billion polymer banknotes of denominations 10 and 20 rupees for field testing. Parliament was informed about this on Tuesday.

Finance Minister Rajya Sabha stated in a written reply that the Reserve Bank of India (RBI), upon the recommendation of its central board, submitted a proposal to the government in accordance with Section 25 of the Reserve Bank of India Act, 1934. This proposal concerned the issuance of one billion polymer banknotes of denominations 10 and 20 rupees for field trials, as well as for regular issuance after the successful completion of the trials.

The minister clarified that, according to the RBI, these polymer banknotes are planned to be issued jointly with paper banknotes based on paper substrate. However, she added that the procurement process is currently in its initial stages, so it is not possible to determine the exact timeline for the introduction of polymer banknotes or their estimated costs at this stage.

In response to another question, Sitaraman noted that the average retail inflation, measured by the Consumer Price Index (CPI), has been steadily declining: from 5.4 percent in 2023-24 to 4.6 percent in 2024-25, and then to 2.1 percent in 2025-26.

She explained the rise in retail inflation to 3.9 percent in the first quarter of 2026-27 due to a surge in commodity prices and high global energy prices caused by the Middle East crisis, seasonal vegetable price increases, and expected adverse El Niño conditions. Nevertheless, she emphasized that this figure remains below the Reserve Bank of India's inflation target of 4 percent.

Furthermore, the minister mentioned that at the 56th meeting of the Goods and Services Tax (GST) Council, a two-speed structure was introduced: the standard rate is 18 percent, the special rate is 5 percent, and a special reduced rate is 40 percent for a range of goods and services (including a previously compensatory duty, which does not increase the overall tax burden). This led to the rationalization of rates on many goods and services: from 28 percent to 18 percent, from 18 percent to 12 or 5 percent, and from 12 percent to 5 percent/zero.

In addition to this, the Government announced in the Budget for 2026-27 the rationalization of the Basic Customs Duty (BCD) on numerous goods starting February 2, 2026, with the aim of reducing production costs, stimulating domestic production, enhancing export competitiveness, and supporting strategic sectors. Additional measures to curb price pressure on essential commodities include reducing BCD on palm oil, soybean oil, and sunflower oil, as well as lowering excise duty on agricultural infrastructure and development on straw. Moreover, in March 2026, the central excise duty on petrol and diesel fuel was reduced by 10 rupees per liter.

Besides indirect tax reforms, the government increased citizens' disposable income by exempting annual incomes up to 12 lakh rupees (12.75 lakh rupees for salaried employees after standard deduction) from income tax. These measures supported household consumption, evidenced by the private final consumer expenditure share in GDP remaining at 56.5-56.7 percent (base year 2022-23). Moreover, according to the latest GDP estimates published by the Ministry of Statistics and Programme Implementation, per capita GDP in terms of private final consumer expenditure showed steady growth of 6.8 percent in 2025-26 compared to 4.8 percent in 2023-24.

Nevertheless, the minister stated that the government is constantly monitoring the country's price situation and taking fiscal, administrative, and supply-side measures required by changing economic conditions to protect the purchasing power of households, especially low and middle-income earners.