**Executive Summary**
This is a summary of the Reserve Bank of India (RBI) Bulletin for February 2026, released on February 20, 2026. The bulletin includes the bi-monthly monetary policy statement (February 6, 2026), one speech, three articles and current statistics. The articles cover the State of the Economy, an assessment of the Union Budget 2026-27, and the analysis of Retail Inflation Volatility in India.
**Key Points / Main Content**
* **State of the Economy:**
* Global economic activity remained stable despite geopolitical uncertainty.
* The domestic economy showed resilience, with positive results from listed private companies.
* The Union Budget 2026-27 maintained commitment to fiscal consolidation and focus on long-term growth with increased capital expenditure.
* Headline inflation remained benign.
* Foreign portfolio investments and the Indian rupee recovered due to improved investor sentiment following the India-EU free trade agreement and the interim India-US trade deal.
* **Union Budget 2026-27: An Assessment (by Akash Raj, Harshita Yadav, Ettem Abhignu Yadav, Aayushi Khandelwal, Anoop K Suresh, and Shromona Ganguly):**
* The budget prioritizes infrastructure investment, technological self-reliance, and human capital development.
* It reaffirms the Government's commitment to fiscal discipline while strengthening resilience, innovation, and long-term economic growth.
* Highlights include:
* Gross fiscal deficit is budgeted to decline to 4.3% of GDP in 2026-27, aiming for a debt to GDP ratio of 50±1% by fiscal year 2030-31.
* ₹12.2 lakh crore (3.1% of GDP) earmarked for capital expenditure. Effective capital expenditure is budgeted to increase to 4.4% of GDP in 2026-27.
* Revenue expenditure is budgeted to be contained at 10.5% of GDP.
* Gross tax revenue is budgeted to increase by 8.0% in 2026-27, mainly due to income tax and union excise duties.
* **Retail Inflation Volatility in India: Sources, Determinants and Implications (by Renjith Mohan, Saquib Hasan, Suvendu Sarkar, and Joice John):**
* Analyzes the sources of headline inflation volatility in India.
* Highlights include:
* The primary source of headline inflation volatility is vegetable prices- specifically tomato, onion, and potato (TOP), along with volatility spillovers emanating from non-TOP vegetables.
* Volatility has eased under the flexible inflation targeting (FIT) framework.
* The decline in inflation volatility since 2021–22 suggests that price shocks no longer broadly propagate across the inflation basket.
* Government's timely supply-side interventions played a crucial role in dampening the adverse effects of commodity-specific price spikes on headline inflation and its volatility.
* A well-coordinated policy mix, combining monetary policy actions and fiscal interventions, is essential for maintaining price stability.
**Impact Analysis**
**Government:**
* **Impact:** The government’s policies and budget allocations are assessed and their impact on fiscal consolidation, economic growth, and inflation are examined.
* **Action Required:** Continue focus on fiscal discipline, infrastructure investment, and effective policy coordination to manage inflation and promote economic growth.
**RBI (Reserve Bank of India):**
* **Impact:** The Bulletin provides insights and analysis to inform monetary policy decisions and actions.
* **Action Required:** Utilize the findings of the articles, particularly on inflation volatility, to refine monetary policy strategies and interventions.
**Investors/Businesses:**
* **Impact:** Provides information on the state of the economy, budget impacts, and inflation trends, which can influence investment decisions.
* **Action Required:** Consider the economic outlook, fiscal policies, and inflation dynamics when making investment and business strategy decisions.
**General Public:**
* **Impact:** The analysis of retail inflation volatility directly affects the public, as it reflects the stability of prices of essential commodities.
* **Action Required:** Stay informed about economic trends and government policies affecting inflation and personal finances.
Key Entities Referenced
Reserve Bank of India: India's central bank, responsible for monetary policy and financial stability.
RBI Bulletin: Monthly publication of the Reserve Bank of India containing articles and statistics on the Indian economy.
Union Budget 2026-27: The annual financial statement of the Union Government of India for the fiscal year 2026-27.
Consumer Price Index-Combined: A measure of the average change over time in the prices paid by urban consumers for a basket of consumer goods and services.
flexible inflation targeting (FIT): A monetary policy framework adopted by the Reserve Bank of India to maintain price stability.
प्रेस प्रकाशनी PRESS RELEASE
भारतीय �रज़व र् बकैं
RESERVE BANK OF INDIA
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Website : www.rbi.org.in Department of Communication, Central Office, Shahid Bhagat Singh Marg, Fort,
ई-मले /email : helpdoc@rbi.org.in Mumbai - 400 001 फोन/Phone: 022 - 2266 0502
February 20, 2026
RBI Bulletin – February 2026
Today, the Reserve Bank released the February 2026 issue of its monthly Bulletin.
The Bulletin includes bi-monthly monetary policy statement (February 6, 2026), one
speech, three articles and current statistics.
The three articles are: I. State of the Economy; II. Union Budget 2026-27: An
Assessment; and III. Retail Inflation Volatility in India: Sources, Determinants, and
Implications.
I. State of the Economy
Global economic activity held up despite a pick-up in geopolitical uncertainty.
Domestic economy remained resilient with quarterly results of listed private companies
showing strengthening of aggregate sales growth. Industrial activity remained strong,
and services sector sustained its healthy growth. The Union Budget 2026-27
reaffirmed Government’s commitment to fiscal consolidation without diluting the focus
on long-term growth with stepped up allocation towards capital expenditure. The
headline inflation continues to remain benign as per the first print under the revised
CPI series. Foreign portfolio investments and Indian rupee staged a comeback with
investor sentiments turning around following the India-EU free trade agreement and
the interim India-US trade deal.
II. Union Budget 2026-27: An Assessment
By Akash Raj, Harshita Yadav, Ettem Abhignu Yadav, Aayushi Khandelwal, Anoop K
Suresh, and Shromona Ganguly
This article presents an assessment of the Union Budget 2026-27. At a time of global
economic uncertainty, the Budget prioritises infrastructure investment, technological
self-reliance, and human capital development. It reaffirms the Government’s
commitment to fiscal discipline while strengthening resilience, innovation and long-
term economic growth.
1Highlights:
• In 2026-27, the gross fiscal deficit is budgeted to decline to 4.3 per cent of GDP
from 4.4 per cent of GDP in 2025-26 (Revised Estimates, RE), keeping in view
the Government’s medium-term aim to reach a debt to GDP ratio of 50±1 per
cent by fiscal year 2030-31.
• Continuing the impetus observed in the previous fiscal years, the Union Budget
2026-27 earmarks ₹12.2 lakh crore (3.1 per cent of GDP) for capital
expenditure. The effective capital expenditure is budgeted to increase to 4.4
per cent of GDP in 2026-27 from 3.9 per cent of GDP in 2025-26 (RE). Revenue
expenditure is budgeted to be contained at 10.5 per cent of GDP in comparison
to 10.8 per cent of GDP in 2025-26 (RE).
• On the receipts side, gross tax revenue is budgeted to increase by 8.0 per cent
in 2026-27 over 2025-26 (RE), largely due to the projected accelerated growth
in income tax and union excise duties.
III. Retail Inflation Volatility in India: Sources, Determinants and Implications
By Renjith Mohan, Saquib Hasan, Suvendu Sarkar and Joice John
This article, based on the Consumer Price Index-Combined (base 2012=100),
examines the sources of headline inflation volatility in India, analyses the volatility
spillovers, and assesses the effectiveness of policy interventions.
Highlights:
• The primary source of headline inflation volatility is vegetable prices—
specifically tomato, onion, and potato (TOP), along with volatility spillovers
emanating from non-TOP vegetables.
• Volatility has eased under the flexible inflation targeting (FIT) framework relative
to the pre-FIT period, even amid repeated supply shocks.
• The decline in inflation volatility since 2021–22 suggests that price shocks no
longer broadly propagate across the inflation basket, indicating anchoring of
inflation expectations.
• Since 2021, the Government’s timely and targeted supply-side interventions
played a crucial role in dampening the adverse effects of commodity-specific
price spikes on headline inflation and its volatility.
• A well-coordinated policy mix, combining monetary policy actions anchoring
inflation expectations, along with fiscal interventions mitigating the ill-effects of
sporadic supply shocks, is essential for maintaining price stability in an
emerging market economy like India.
The views expressed in the Bulletin articles are of the authors and do not represent
the views of the Reserve Bank of India.
(Brij Raj)
Press Release: 2025-2026/2146 Chief General Manager
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