Malhotra said in an interview that the economy’s Goldilocks phase can be sustained and interest rates are likely to stay at current levels or go even lower as inflation looks benign. Economists expect a long pause after the policy rate was cut by a cumulative 125 bps to 5.25% between February and December last year, against the backdrop of January headline inflation at 2.75%, well below RBI’s target, and December quarter growth at 7.8% in new series.
Read more: We expect policy rate to be at current level or lower for a long time: Sanjay Malhotra, Governor, RBI
The interview took place before the West Asian conflict began.
“Now, what are the risks? It will depend on the growth-inflation dynamics as they play out. We are still living in very uncertain times,” he said.
He dismissed concerns on rising currency in circulation, noting that “as an economy grows, demand for cash too increases.” He said funding will not constrain UPI expansion.
Malhotra said there is scope to raise credit penetration and the regulator is open to more banks. He added that the Tata Sons application to surrender its upper-layer NBFC classification is “under examination.”He said overseas inflows have tilted toward markets with AI opportunities and it isn’t reflective of India’s strong fundamentals.