RBI Governor Backs India’s Growth Outlook, Flags West Asia Crisis & Weak Monsoon As Major Risks

Mumbai: Reserve Bank of India Governor Sanjay Malhotra has backed India’s economic growth outlook, saying strong macroeconomic fundamentals and sound policies will help the country navigate global and domestic challenges.

However, he identified the West Asia crisis and the possibility of a weak monsoon as major risks to growth during the current financial year.

Growth Remains Strong

In an interview with DD News, Malhotra said India had recorded growth of more than 7 percent in recent years. The economy expanded by 7.7 percent in the previous financial year, supported by robust fundamentals.

The RBI has projected GDP growth of 6.6 percent for FY27 despite geopolitical tensions and global uncertainty. Malhotra said strong monetary and fiscal policies continued to support economic activity.

Monsoon A Key Risk

The governor said the monsoon’s performance would be crucial because a large section of India’s population depends on agriculture. The sector contributes nearly 17 percent to the country’s GDP.

He stressed that the central bank must remain vigilant about rainfall and its possible impact on farm production, rural demand and food prices.

Inflation Forecast Raised

The RBI has increased its FY27 inflation forecast to 5.1 percent from 4.6 percent. Retail inflation rose to 4.38 percent in June from 3.93 percent in May, while food inflation climbed to 5.32 percent.

Malhotra said the increase above the RBI’s 4 percent inflation target was mainly caused by supply-side pressures. He maintained that low and stable inflation was essential for sustainable economic growth.

Rupee Remains Stable

Backing the rupee’s performance, Malhotra said several global currencies had weakened after the West Asia conflict strengthened the dollar. Compared with international peers, the rupee’s movement remained normal.

He also highlighted India’s strong external position. Gross foreign direct investment reached a record $95 billion last year, while net FDI stood at around $7 billion during the first two months of FY27.

Bank credit growth remained broad-based, rising nearly 18 percent year-on-year in June. Malhotra also encouraged banks to adopt artificial intelligence while strengthening cybersecurity, fraud prevention and customer data safeguards.