After facing criticism for prioritising inflation control over economic growth, the Reserve Bank of India’s (RBI) new Governor, Sanjay Malhotra, expressed optimism about India’s economic prospects for 2025. In his foreword to the Financial Stability Report released on Monday, Malhotra highlighted robust consumer and business confidence as pivotal drivers of the country’s economic progress.

“Consumer and business confidence for the year ahead remain high and the investment scenario is brighter as corporations step into 2025 with robust balance sheets and high profitability,” said Malhotra who took over as 26th Governor earlier this month, as PTI reported.

Although India experienced a slowdown in the first half of the financial year, Malhotra expects the economy to pick up in the second half. The country’s GDP growth was 6% for the first half of 2024-25, with the second quarter seeing a dip to 5.4%, the lowest in seven quarters.

The Finance Ministry’s November Monthly Economic Review had raised concerns about structural factors contributing to the slowdown in the first half. Despite this, many analysts believe the RBI may cut its policy rates in the upcoming Monetary Policy Committee meeting as inflation continues to moderate.

Malhotra also highlighted the strength of India’s financial system, stating that stress test results show the capital levels of both the banking system and Non-Banking Financial Companies (NBFCs) are well above the regulatory minimum, even under adverse stress scenarios.

“We continue to secure and anchor public trust and confidence to support India’s aspirational goals. We remain committed to developing a modern financial system that is customer-centric, technologically leveraged and financially inclusive,” he said.

On the global front, Malhotra acknowledged the challenges of geopolitical tensions, climate events, and rising debt. However, he expressed confidence that the decline in inflation globally would help restore purchasing power and give central banks more space to support economic activity.

While the immediate outlook is positive, Malhotra warned that the medium-term scenario remains uncertain due to ongoing geopolitical risks, market vulnerabilities, and emerging technological threats.

Overall, the RBI Governor remains focused on maintaining financial stability while supporting India’s long-term growth ambitions, promising a resilient and robust economic framework in the face of global uncertainty.

(With PTI inputs)