Reserve Bank of India Governor Sanjay Malhotra has said that the West Asia crisis and the expectation of a weak monsoon present significant risks to economic growth.
“Despite global uncertainties, India has witnessed an over 7 per cent growth rate in the past few years. Last financial year, India clocked a growth rate of 7.7 per cent supported by strong and robust macroeconomic fundamentals,” Malhotra said in an interview.
“The RBI has projected a GDP growth of 6.6 per cent for the current financial year despite various challenges. Monetary and fiscal policies are robust, and because of that, we are witnessing high GDP growth,” he said.
On inflation, Malhotra said the central bank has raised its inflation forecast to 5.1 per cent for FY27, higher from its earlier estimate of 4.6 per cent. Inflation going past the Reserve Bank’s median target of 4 per cent in June was largely driven by supply-side factors, he noted.
Retail inflation climbed to 4.38 per cent in June from 3.93 per cent in May, mainly due to costlier food items. Food inflation increased to 5.32 per cent in June from 4.78 per cent in the preceding month.
Talking about another risk factor, Malhotra said that how the monsoon behaves is crucial as a large population depends on the agriculture sector.
Agriculture contributes about 17 per cent to the GDP, he said, adding that “we have to be vigilant about that (monsoon)”.
On the rupee depreciation, Malhotra said the domestic currency performance against peers remains stable despite a stronger dollar and heightened global uncertainty. “After the war in West Asia, the dollar has become strong. The currencies of many countries have weakened. If we look at it from a global perspective, India’s rupee situation can be considered normal,” he said.
Last year, the gross FDI was around USD 95 billion, which was a record, Malhotra said, adding that net foreign direct investment in the first two months of the current financial year was around USD 7 billion. “In the medium and long term, our balance of payments and our external sector will remain strong. There is no need to worry,” he said.
Malhotra said the RBI will continue to prioritise inflation while supporting economic growth, and low and stable inflation provides the foundation for sustainable growth. “Inflation control remains the RBI’s primary objective under the flexible inflation-targeting framework, while growth is its secondary objective. They are not in opposition. They support each other,” he added.
Asked about the loan growth, the governor said credit growth remained broad-based across sectors. Overall bank credit grew around 18 per cent year-on-year in June against 17.5 per cent in May.
On artificial intelligence adoption, Malhotra said the RBI had encouraged banks to adopt AI to improve customer service, lower operating costs and enhance decision-making while ensuring safeguards against cybersecurity and data privacy risks.
Also read: RBI proposes new data rules for banks, NBFCs
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