The government has approved the introduction of one billion polymer banknotes each in the Rs 10 and Rs 20 denominations for field trials, Parliament was informed on Tuesday.
The Reserve Bank of India (RBI), following a recommendation from its central board, had submitted a proposal to the government under Section 25 of the Reserve Bank of India Act, 1934. The proposal covers the introduction of one billion pieces each of Rs 10 and Rs 20 polymer notes for field trials, followed by regular issuance if the trials are successful.
Finance minister Nirmala Sitharaman said in a written reply to the Rajya Sabha, "The proposal has been approved by the government. As per the RBI, these polymer banknotes are proposed to be issued along with paper substrate-based banknotes."
The RBI has said that the procurement process is currently at an initial stage. As a result, the government cannot yet specify when the polymer notes will be introduced or how much the exercise will cost.
Inflation remains below RBI target
Sitharaman also said retail inflation, measured by the Consumer Price Index (CPI), has declined over the past few years. Average inflation fell from 5.4 per cent in 2023-24 to 4.6 per cent in 2024-25 and further to 2.1 per cent in 2025-26.
Inflation, however, rose to 3.9 per cent in the first quarter of 2026-27. The increase was attributed to the commodity price shock and elevated global energy prices linked to the West Asia crisis, a seasonal rise in vegetable prices and expected unfavourable El Niño conditions.
Despite the rise, inflation remains below the RBI's 4 per cent target, the minister said.
GST, customs duty measures highlighted
The minister also pointed to recent tax measures aimed at easing costs and supporting consumption. The 56th GST Council meeting introduced a two-rate structure comprising an 18 per cent standard rate, a 5 per cent merit rate and a 40 per cent special de-merit rate for select goods and services.
Several items were consequently moved from the 28 per cent slab to 18 per cent, while others 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 (BCD) on several goods from February 2, 2026, with the stated aim of reducing input costs, supporting domestic manufacturing and improving export competitiveness.
Government cites stronger household consumption
Sitharaman said measures to contain price pressures included lower BCD on crude palm, soybean and sunflower oils, 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.
The government also exempted annual incomes up to Rs 12 lakh from income tax, with the threshold rising to Rs 12.75 lakh for salaried individuals after the standard deduction.
According to the minister, private final consumption expenditure remained broadly stable at 56.5-56.7 per cent of GDP, while per capita PFCE grew 6.8 per cent in 2025-26, compared with 4.8 per cent in 2023-24.