Speaking at the International Monetary Fund‘s ‘Governor Talks’ session in Washington DC, Sanjay Malhotra said the 6.8% economic growth that RBI forecasts for this fiscal year is below its aspirational levels, the growth projection factors higher tariffs as the baseline.
Capacity utilisations are increasing and there is a better investment sentiment in businesses, he said. However, uncertainty is “holding back on the animal spirits, and households as well as businesses are kind of delaying their investment and expenditures”.
The central bank revised its projection for India’s growth in fiscal 2026 to 6.8% from 6.5% at its policy announced earlier this month.
Acknowledging global uncertainties, Malhotra said: “We are living in times of unprecedented uncertainties on account of various reasons, including policy uncertainties…It is a risk that all Emerging Market economies must take into account.”
In response to a question from ET on the risk building up due to runaway gold prices and central banks hoarding gold, the RBI governor said: “We have a very diverse mix of our reserves. While the current gold price appreciation helped us bolster our reserves, it is sufficient to support 11 months of our imports. The diversity of our reserves means any depreciation will not have high implications for us. I don’t think it has any implications for households.” He agreed gold has great sentimental value. “I have not seen them (households) selling gold or using it for their needs. So, I don’t think it is a risk for households as well.” On currency movement, the governor said rupee levels are going to be decided by macroeconomic fundamentals, capital flows and, more importantly, the current account flows. “What it means is that we look structurally on how we improve our competitiveness, productivity, so that we are not only able to expand exports, but also able to diversify exports, and we are able to get some good durable capital inflows. That’s what is going to decide how the rupee, or the local currency, is going to behave,” he said.
India’s macroeconomic fundamentals are very strong, he said, adding that RBI’s effort is to ensure that there is an orderly movement of the rupee on both sides, and any undue or any abnormal volatility is curbed.
The governor urged other countries to adopt central bank digital currencies which are designed primarily to facilitate cross-border payments rather than domestic transactions. He also cautioned on cryptocurrencies.
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