India Soon To Have Plastic Notes As RBI's Proposal For Polymer Banknotes Approved; What Govt Said In Parliament

The Union Finance Minister on Tuesday informed the Rajya Sabha that the government has authorised field trials for one billion polymer banknotes in Rs 10 and Rs 20 denominations. Following a proposal from the RBI Board under Section 25 of the RBI Act, 1934, these notes will undergo testing before potential regular issuance upon successful trial completion.

"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," she said in a written reply. 

The Plan Is At An Initial Stage

The Finance Minister further noted that the Reserve Bank of India is currently in the initial stages of the procurement process. Regarding broader economic trends, she highlighted a consistent decline in average retail inflation, as measured by the Consumer Price Index (CPI), which dropped 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.

While retail inflation did see a seasonal uptick to 3.9 per cent in the first quarter of 2026-27—driven by elevated energy costs from the West Asia crisis, rising vegetable prices, and anticipated El Niño conditions—it remains within the RBI's 4 per cent target.

"The 56th meeting of the Goods and Services Tax (GST) Council has brought in a two-rate structure with a standard rate of 18 per cent, a merit rate of 5 per cent and a special de-merit rate of 40 per cent for a select few goods and services (but inclusive of earlier compensation cess rate, and hence with no increase in overall tax burden)," she said.

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This led to the streamlining of tax rates for numerous items and services, transitioning them from 28 per cent down to 18 per cent, and further adjustments from 18 per cent to 12 or 5 per cent, and 12 per cent to 5 per cent or zero.

Furthermore, she noted that to lower input expenses, stimulate domestic production, enhance export competitiveness, and assist vital industries, the government introduced the rationalisation of Basic Customs Duty (BCD) for various products in the Union Budget 2026-27, effective February 2, 2026.

Other actions taken to manage pricing for basic goods include cutting the BCD on crude palm, soybean, and sunflower oils; lowering the agriculture infrastructure and development cess for masur; and reducing central excise duty on petrol and diesel by Rs 10 per litre as of March 2026, she added.

Beyond indirect tax reforms, the government has boosted personal spending power by exempting annual incomes up to Rs 12 lakh (or Rs 12.75 lakh for those earning a salary, considering the standard deduction) from any income tax.

She mentioned that these initiatives have bolstered household spending, with private final consumption expenditure as a percentage of GDP remaining steady at approximately 56.5-56.7 per cent (based on the 2022-23 fiscal year).

Additionally, recent GDP data from the Ministry of Statistics and Programme Implementation shows that per capita Private Final Consumption Expenditure (PFCE) grew by a strong 6.8 per cent in 2025-26, an increase from the 4.8 per cent growth seen in 2023-24.

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Still, she emphasised that the government keeps a close watch on national price trends and implements fiscal, administrative, and supply-side adjustments as needed by the shifting economy to safeguard the financial standing of households, especially those in the low- and middle-income brackets.

(With Inputs From PTI)