RBI remains watchful of global, monsoon situation says Sanjay Malhotra

Reserve Bank of India (RBI) governor Sanjay Malhotra on Wednesday said it is too premature to talk about an interest rate hike as the central bank has so far not seen any signs of inflation being generalised into consumer prices.

“If it was so certain that we are going to hike (rates) in the coming months, then we would have changed the stance from neutral to restrictive, right? We did not do that,” Malhotra said in an interview to ET Now. “We did not do that precisely because there is elevated uncertainty.”

He cautioned that the global environment and the progress of monsoon remain uncertain, and assured that the RBI is keeping an eye on these factors.


“We are in a wait-and-watch mode because the monsoon has been weak so far but, just to clarify, we have enough food stocks. The impact on growth is what is to be monitored,” Malhotra said.

Global uncertainties remain the primary challenge in the next 12-18 months but the RBI is well-positioned to deal with them, he said.

“Upside risks on crude, energy and fertilisers have certainly reduced, but we’ll have to still wait and watch as to where crude prices ultimately end up,” Malhotra said, expressing the hope that crude prices will come down next year.

The RBI will keep an eye on both crude oil prices and the progress of monsoon to take a view on inflation, the central bank governor said.

“There is elevated uncertainty so we have to be cautious. There could be risks on both inflation and growth,” Malhotra said.

In the monetary policy committee (MPC) meeting on June 5, the RBI unanimously decided to keep the repo rate unchanged at 5.25%, while acknowledging that the risks of higher inflation had amplified. It also decided to maintain a neutral policy stance.

“The MPC felt it would be prudent to wait for greater clarity to emerge. Accordingly, the MPC voted to keep the policy rate unchanged. At the same time, the MPC will continue to remain data-dependent and closely monitor the developments, including supply side pressures getting embedded in the general price level and inflation expectations,” governor Malhotra had said in the policy statement.

The RBI has revised its consumer price inflation forecast upwards citing higher global crude oil prices and their knock-on effects on fuel, industrial inputs and raw materials. It now expects consumer inflation to increase to 5.1% in 2026-27 from 4.6% forecast earlier. The central bank also increased inflation forecasts between 20-70 basis points in each quarter of this fiscal. A basis point is a hundredth of a percentage point.

Growth forecast for this fiscal was also revised downwards to 6.6% from 6.9% earlier, with forecast for each quarter revised downwards by 20-40 basis points.

In the interview to ET Now Malhotra said that though the de-escalation in the West Asian conflict is a big positive for the entire world, including the Indian economy, and the outlook has improved, risks have not disappeared.

He reiterated that India remains well prepared to deal with both external and domestic challenges.

India’s retail inflation (based on Consumer Price Index) accelerated to 3.93% year-on-year in May from 3.48% in April, but below the RBI's medium-term target of 4%.

Governor Malhotra expressed confidence that the recent measures by the central bank to attract dollar inflows would yield fruit, though he did not give a target for how much the RBI plans to garner.

The rupee has recovered since hitting an all-time low of Rs 96.96 per US dollar in May, trading at Rs 94.70 per dollar on Wednesday, in the wake of measures taken by the RBI and the government including tax breaks to get foreign institutional investors back into India's bond market.