Announcing the Monetary Policy Committee decisions of the Reserve Bank of India, Governor Sanjay Malhotra on Wednesday warned that escalating geopolitical tensions in West Asia could weigh on India’s economic growth and heighten uncertainty, even as he underscored the resilience of domestic fundamentals.
“Before the outbreak of war, India’s macroeconomic fundamentals exuded confidence. However, conditions turned adverse in March,” the governor said during the policy statement.
Geopolitical tensions amplify global risks
Malhotra said global growth is facing mounting downside risks as geopolitical tensions disrupt supply chains and push up commodity prices.
“Global growth faces increasing downside risks as the sharp rise in energy prices and shortages of inputs have stoked inflation fears,” he said.
He added that disruptions in energy and fertiliser markets could have broader macroeconomic implications, including pressure on fiscal balances and external stability.
External demand, remittances under pressure
The RBI chief cautioned that a weaker global growth outlook could dampen external demand and impact inflows into the domestic economy.
“Weaker global growth prospects may dampen external demand and reduce remittance flows,” Malhotra said.
He also flagged that heightened uncertainty and increased risk aversion in global markets could tighten financial conditions and affect domestic liquidity.
“Heightened uncertainties and increased risk aversion could impact domestic liquidity conditions,” he noted.
Domestic fundamentals remain resilient
Despite the evolving global challenges, Malhotra maintained that the Indian economy continues to remain on a strong footing.
“Fundamentals of the Indian economy are on a stronger footing,” he said, pointing to sustained momentum in domestic demand and investment activity.
He added that the central bank remains committed to ensuring adequate liquidity to support productive sectors of the economy.
“We will ensure sufficient liquidity in the banking system to meet the productive requirements of the Indian economy,” the governor said.
Investment climate and capital flows stable
Malhotra said India continues to remain an attractive destination for investments, particularly in greenfield projects, even as global capital flows turn volatile.
“Net FDI has shown improvement on a small base of last year. India remains an attractive destination for greenfield FDI projects,” he said.
Cautious policy watch amid global uncertainty
The governor’s remarks reflect a cautious policy stance as policymakers track rapidly evolving geopolitical developments and their economic spillovers.
While domestic conditions remain supportive, Malhotra signalled that external risks, particularly from the West Asia conflict and global commodity volatility, could shape the near term outlook and require close monitoring by the central bank.
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