RBI Governor Sanjay Malhotra stated that the new fiscal year began amid global economic uncertainty, with the central bank closely monitoring inflation risks resulting from these developments. His comments follow the Trump administration's recent decision to impose reciprocal tariffs on Indian exports.
In an address to announce the Monetary Policy Committee's (MPC) decisions on Wednesday, the Governor stated, "First and foremost, uncertainty dampens growth by influencing investment and spending decisions by businesses and households alike. Second, the dent in global growth caused by trade frictions will impede domestic growth. Third, higher tariffs will reduce net exports."
"Relative tariffs have an impact; our tariffs are relatively low in comparison to other countries. Then there is the unknown of the elasticities of our export and import demand, as well as the policy measures we have implemented. "India is very aggressively and proactively engaging with the US administration on the foreign trade agreement..." he added.
While acknowledging that it is currently difficult to determine the precise impact of international events on India's economic performance, he emphasized the RBI's confidence in managing domestic growth effectively.
Sanjay Malhotra also mentioned positive trends in agriculture and the revival of manufacturing. "The service sector continues to demonstrate resilience. Urban consumption is picking up with the increase in discretionary spending," he stated that the financial health of banks and corporations remains "healthy".
