Governor Sanjay Malhotra says India’s growth stable but warns of global fragility, policy trade-offs tightening.
After a surprise 50-basis-point repo rate cut to 5.50%, Reserve Bank of India Governor Sanjay Malhotra on June 6 flagged that the central bank’s monetary arsenal now has “very limited space” left to support growth, amid a shifting global and domestic macroeconomic landscape.
Malhotra said the latest cut — following a swift 100-bps easing since February 2025 — was aimed at supporting India’s growth momentum without compromising inflation stability. But he cautioned that future rate decisions will be “data-dependent,” with the Monetary Policy Committee (MPC) closely watching incoming signals on inflation, growth, and global volatility.
“From here onwards, the MPC will be carefully assessing the incoming data and the evolving outlook to chart out the future course of monetary policy,” Malhotra said, unveiling the central bank’s latest policy stance.
Despite the temporary easing in global uncertainties and revived optimism around trade talks, Malhotra underscored that the international backdrop remains “fragile and highly fluid.” Multilateral agencies have downgraded growth and trade projections, he noted, citing risks from elevated debt, AI-led disruptions, and economic fragmentation.
India resilient, but inflation fight not over
On the domestic front, Malhotra struck a cautiously optimistic tone. “Strong macroeconomic fundamentals and a benign inflation outlook provide some space to support growth,” he said, while reiterating the RBI’s FY26 growth estimate at 6.5%.
However, the Governor warned that “the last mile of disinflation is proving more protracted,” requiring a finely balanced approach to navigating the growth-inflation trade-off.
“The trade-offs are becoming more challenging,” he said, adding that India’s monetary path will now be “more cautious and carefully calibrated.”
Three Ds powering India’s economic strength
Calling India a “picture of strength, stability, and opportunity” amid global turbulence, Malhotra highlighted the economy’s resilience backed by robust balance sheets across five core sectors — corporates, banks, households, the government, and the external sector.
He credited India's stability to a confluence of three key factors — demographics, digitization, and domestic demand — positioning the country as an attractive investment destination despite global financial instability.
Amidst capital flow volatility and currency pressures, emerging economies like India face heightened policy constraints, Malhotra acknowledged. But India’s relative insulation, strong fundamentals, and policy stability continue to offer a durable buffer against external shocks, he asserted.
“Today’s policy move should be seen as a step toward propelling growth to a higher aspirational trajectory,” Malhotra concluded.
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