West Asian crisis, uncertain monsoon, key risks to growth: RBI Governor

“Monetary and fiscal policies are robust and hence we are witnessing high GDP growth,” RBI Governor Sanjay Malhotra said. File | Photo credit: ANI

Reserve Bank Governor Sanjay Malhotra said the crisis in West Asia and expectations of a weak monsoon pose a significant risk to economic growth.

“Despite global uncertainty, India has witnessed a growth rate of over 7% in the last few years. Last financial year, India achieved a growth rate of 7.7% supported by strong and robust macroeconomic fundamentals,” he told DD News in an interview.

The Reserve Bank of India (RBI) has projected GDP to grow by 6.6% this financial year despite various challenges, he said.

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“Monetary and fiscal policies are robust, which is why we are witnessing high GDP growth,” the governor added.

On inflation, he said the central bank raised its inflation forecast to 5.1% for FY27, up from its earlier estimate of 4.6%.

Malhotra noted that inflation, which exceeded the Reserve Bank’s mid-point target of 4% in June, was largely driven by supply-side factors.

Retail inflation rose to 4.38% in June from 3.93% in May, mainly due to more expensive food.

Food inflation increased to 5.32% in June from 4.78% in the previous month.

Talking about another risk factor, Mr. Malhotra said how the monsoon behaves is crucial as a large population depends on the agricultural sector.

Agriculture contributes about 17% to GDP, he said, adding that “we have to be vigilant about it (monsoon)”.

On the rupee’s depreciation, Mr Malhotra said the domestic currency’s performance against others remained stable despite a stronger dollar and heightened global uncertainty.

“After the war in West Asia, the dollar strengthened. The currencies of many countries weakened. If we look at it from a global perspective, the situation in the Indian rupee can be considered normal,” he said.

Last year, gross foreign direct investment was around $95 billion, a record, Malhotra said, adding that net foreign direct investment in the first two months of the current financial year was around $7 billion.

“In the medium to long term, our balance of payments and our external sector will remain strong. There is no need to worry,” he said.

Mr. Malhotra further said that the RBI will continue to prioritize inflation while supporting economic growth and low and stable inflation provides the basis for sustainable growth.

Controlling inflation remained the RBI’s primary objective under flexible inflation targeting, while growth was its secondary objective.

“They are not in opposition. They support each other,” he added.

Asked about credit growth, the governor said credit growth remained broad across sectors.

Total bank lending rose about 18% year-on-year in June, up from 17.5% in May, he said.

On the adoption of AI, Mr. Malhotra said the RBI has encouraged banks to adopt AI to improve customer service, reduce operational costs and improve decision-making while providing safeguards against cyber security and privacy risks.

Earlier this week, the governor reached out to CEOs and CEOs of public and select private sector banks, asking them to use advanced technology, including artificial intelligence, to expand their reach while ensuring robust cyber security and safeguards against fraud and data misuse.

Published – 17 Jul 2026 22:16 IST