Despite international uncertainties, India's economy has reached a "well settled equilibrium of resilient growth," according to Reserve Bank of India governor Sanjay Malhotra, who credited the country's solid macroeconomic foundations developed over many years. Addressing the Kautilya Economic Conclave in New Delhi on 'Central Banking in Turbulent Times', Malhotra said: "India has been strong because of the focus on microeconomic stability, price stability, financial stability, and even policy stability, which has ensured that we have forex reserves of over $700 billion, low inflation since February, a narrow current account deficit, a credible fiscal consolidation path, and strong balance sheets among banks and corporates." He attributed this to continuity in reform momentum and adoption of global best frameworks, tailored to the needs of India, in a combined effort of governments, policymakers, regulators and regulated entities. These remarks came two days after the RBI on Wednesday revised upward its growth projections for the current financial year to 6.8 per cent from 6.5 per cent estimated in August, while revising downward its inflation forecast for 2025-26 to 2.6 per cent from 3.1 per cent, largely on the back of rationalization of the goods and services tax rate and an above-normal monsoon.
The economy, in short, appears to be back to the equilibrium of robust growth, even if the odds were stacked against it recently. A larger emerging market, this is a major achievement and makes India a stable anchor in a volatile world," said Malhotra. The governor also said that although uncertainties such as US reciprocal tariffs had not completely disrupted the world economy, "Even though uncertainty has become a pervasive element of contemporary discourse, its tangible effects on real economy, thus far, have been muted. We have more to see as to how it unfolds," he added. But Malhotra said that given the different growth paths of economies, the global economy would run below potential for a period of time and that the current trade policy environment and restrictions could hurt, perhaps permanently, growth in some economies. The governor pointed to fiscal stress as an important risk factor, saying that almost every country was stressed. Fiscal stress, he added, was a critical risk factor, and it was not clear how it could be normalized, especially if the world entered a period of lower economic growth, which is the risk for all of us, particularly if the lower growth is not met with high inflation. While some large economies still have inflation above target, it is not too high, he added. Tariffs in conjunction with large and stretched public debts nearly everywhere in the world will have a material impact on their respective economies and the global economy, he cautioned.