Macros strong, but weak rains, war can hit growth: RBI Guv Sanjay Malhotra

MUMBAI: Reserve Bank of India (RBI) Governor Sanjay Malhotra said risks from the West Asia conflict and the likelihood of a weak monsoon could weigh on economic growth, although the country's macroeconomic fundamentals remain strong.

In an interview with DD News, he said: "Monetary and fiscal policies are robust, and because of that, we are witnessing high GDP growth."

The Indian economy expanded 7.7% in the last financial year, and the RBI has projected GDP growth of 6.6% for the current fiscal year despite global uncertainties, he added.


The governor also flagged inflation risks, noting that the RBI had raised its inflation forecast for FY27 to 5.1% from 4.6% earlier.

Retail inflation accelerated to 4.38% in June from 3.93% in May, driven by higher food prices, while food inflation rose to 5.32% from 4.78% in the previous month.

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Malhotra said inflation breaching the RBI's 4% target in June was mainly due to supply-side factors.

He said the monsoon remained a key factor to watch, given agriculture's importance to the economy, contributing about 17% to India's GDP.

On the rupee, Malhotra said the currency had remained relatively stable compared with its global peers despite a stronger dollar and heightened uncertainty following the conflict in West Asia.

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"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.

Malhotra said India's external sector remained resilient, citing record gross foreign direct investment of about $95 billion last year and net FDI inflows of around $7 billion in the first two months of the current fiscal year.

"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.

The RBI will continue to prioritise inflation control while supporting growth, Malhotra said, stressing that low and stable inflation is essential for sustainable economic expansion.