RBI Monetary Policy Committee announcements: Governor Sanjay Malhotra said that India’s strong macroeconomic fundamentals exuded confidence with buoyant growth and low inflation despite global uncertainties before the breakout of the West Asia war. He said that as the conflict deepened, conditions turned adverse.
“The fundamentals of the Indian economy are on a stronger footing at the current juncture than it was in previous crisis episodes, as well as relative to many other economies, providing it with greater resilience to withstand shocks,” he said.
DON’T MISS | RBI MPC: Gov Sanjay Malhotra estimates GDP growth rate at 6.9% this year
The governor indicated that India’s growth trajectory could be impacted due to the West Asia war. He listed five factors that could affect the Indian growth rate:
- Elevated crude oil prices could increase inflation and widen current account deficit
- Disruptions in energy markets, fertilisers and other commodities may adversely impact industry, agriculture and services, reducing domestic output
- Heightened uncertainty could increase risk aversion and safe haven demand could impact liquidity conditions, economic activity, consumption and investments
- Weaker global growth prospects may dampen external demand and reduce remittance flows
- Adverse spillovers from global financial markets could tighten domestic financial conditions and raise the cost of borrowing
He acquiesced that heightened uncertainty, arising out of the conflict, is weighing on the economic outlook. The RBI projected India’s GDP growth for 2026-27 at 6.9 per cent, as compared to 7.6 per cent in the previous fiscal as per the new series.
“The MPC noted that the intensity and the duration of the conflict in West Asia and the resultant damage to the energy and other infrastructure add risk to the inflation and growth outlooks. However, the fundamentals of the Indian economy are on a stronger footing, providing it with greater resilience to withstand shocks now than in the past. The economy is confronted with a supply shock. It is prudent to wait and watch the changing circumstances and the evolving growth-inflation outlook,” said the RBI.
