The much awaited statement by Reserve Bank of India (RBI) governor Sanjay Malhotra on the monetary policy stance holds out hope but with caveats to be expected in times of uncertainties. The RBI governor who concluded last calendar year drawing comfort from that rare ‘Goldilocks period’ of the Indian economy of high growth and exceptionally low inflation, is today having reasons to see hope even as worries remain emanating from the uncertainties regarding south-west monsoon, El Niño, geopolitics to the future of the global trade policy.
The statement encapsulating both the concerns and the comfort, says, “the global economic conditions and sentiments continue to remain hostage to the rapidly oscillating developments, both in scale and intensity, of the West Asia conflict. While these have impacted the domestic growth-inflation outlook adversely, the stronger macroeconomic fundamentals of the Indian economy are helping navigate this global shock resolutely.”
To the discerning number gurus from the Indian financial world who do not wish to be named, the message is not that of pure gloom and doom but a pointer to investment and savings decisions that factor in the worries emanating from the external environment and especially those that could impact supply chains. The resilience of the Indian economy evident from projects not getting stalled, production of goods not witness to a pull back and unhindered bank lending. This, even as worries remain and the forecasts based on assumptions that could go awry.
On inflation control and price stability, the governor points to core inflation remaining “moderate and expected to decline after peaking in Q3.” While the “generalised inflation pressures continue to remain modest so far, the risks of second-round impact of higher food, fuel and other input prices translating to broad-based inflation persist.”
For a country where little over 50 per cent of farm area is irrigated in a sector that employs more than 40 percent of the working population, the saving grace lies in “the reservoir levels, which remain close to normal… The government’s initiatives for crop diversification, including short duration as well as climate-resilient crops, and water harvesting and conservation,” expected to mitigate the impact of deficient rainfall.
The upside as also the concerns are evident in the statement for manufacturing sector too: “Although manufacturing sector may face cost pressures, the growing diversification of global supply chains should help mitigate the impact.” The “Services sector is expected to maintain its buoyancy on the back of strong domestic demand.”
It is perhaps with good reason that the growth number is up from 6.6 percent last to “real GDP growth for 2026-27 projected at 6.7 per cent.”
For a country that aspires to be on the high table of rich nations by 2047, it is still an arduous journey ahead but in a world where key geographies, Middle East included, are struggling, there may be a case for hinging onto hope albeit conditioned upon the realisation of many of the assumption factored in while drawing up the forecasts.