Government approves one billion polymer ₹10 and ₹20 notes for trial

The government has approved the introduction of one billion polymer banknotes each of ₹10 and ₹20 for field trials, Parliament was informed on Tuesday (August 11, 2026). The move follows a proposal from the Reserve Bank of India (RBI) under Section 25 of the RBI Act, 1934.

In a written reply to the Rajya Sabha, Finance Minister said the RBI, with the recommendation of its central board, had sent the proposal for field trials and subsequent regular issuance of polymer banknotes in these two denominations after successful completion of trials. The proposal has now been approved.

According to the Minister, the RBI has indicated that these polymer banknotes will be issued alongside the existing paper substrate-based banknotes. However, the procurement process is presently at an initial stage. Therefore, the exact timeframe for introduction and the likely expenditure cannot be determined at this point.

In the same reply, the Minister also provided an update on retail inflation. The average Consumer Price Index (CPI) inflation declined steadily from 5.4% in 2023-24 to 4.6% in 2024-25, and further to 2.1% in 2025-26.

However, reflecting the commodity price shock and elevated global energy prices due to the West Asia crisis, a seasonal pickup in vegetable prices, and expected unfavourable El Niño conditions, retail inflation rose to 3.9% in the first quarter of 2026-27. The Minister noted that this remains below the RBI's inflation target of 4%.

On indirect taxes, the Minister said the 56th Goods and Services Tax (GST) Council meeting introduced a two-rate structure — a standard rate of 18%, a merit rate of 5%, and a special de-merit rate of 40% for select goods and services, inclusive of the compensation cess. This rationalised rates on many items from 28% to 18%, 18% to 12% or 5%, and from 12% to 5% or nil.

Further, the Union Budget 2026-27 announced rationalisation of Basic Customs Duty (BCD) on a host of goods effective February 2, 2026, to reduce input costs, boost domestic manufacturing, promote exports, and support strategic sectors. Additionally, the government reduced BCD on crude palm, soybean, and sunflower oils; lowered the agriculture infrastructure and development cess on masur; and cut central excise duty on petrol and diesel by ₹10 per litre in March 2026.

The Minister also highlighted that income tax exemption for annual incomes up to ₹12 lakh (₹12.75 lakh for salaried individuals after standard deduction) has increased disposable income. Data shows per capita Private Final Consumption Expenditure (PFCE) grew 6.8% in 2025-26, up from 4.8% in 2023-24, while the share of PFCE in GDP remained broadly stable at 56.5-56.7%.

Reiterating the government's commitment, the Minister said continuous monitoring and fiscal, administrative, and supply-side measures will be undertaken as needed to protect household purchasing power, especially for low- and middle-income groups.