Kautilya Conclave: India can grow at 7-8%, says RBI Guv Sanjay Malhotra

Global economy resilient despite uncertainty: RBI Governor Sanjay Malhotra

Despite higher United States (US) import tariffs, trade restrictions, and ongoing uncertainties, the global economy has remained surprisingly resilient so far, said Reserve Bank of India (RBI) Governor Sanjay Malhotra on Friday at the fourth Kautilya Conclave in New Delhi.

 

“Growth has been upbeat and broadly in line with projections. While uncertainty has become a pervasive feature of contemporary discourse, its tangible effects on the real economy have, thus far, been muted. There is still more to observe as developments unfold. The global economy is likely to perform below its true potential for some time, given the diverging growth trajectories across countries,” the RBI Governor added.

 

Malhotra also noted that India’s macroeconomic fundamentals — from robust foreign exchange reserves and low inflation since February to a narrowing current account deficit and strong bank balance sheets — have been built painstakingly over decades.

 

“Despite all odds, the economy seems well settled into an equilibrium of resilient growth,” he said, crediting policymakers, regulators, and market participants with safeguarding stability. Malhotra contrasted India’s resilience with the fragility seen across advanced economies.

 

He also pointed out that India’s record growth in recent years gives the confidence that the economy can sustain a 7–8 per cent growth trajectory. “India’s past years’ growth gives us the confidence that India can grow at 7–8 per cent,” he said, adding that the central bank’s “primary focus is price stability, but growth also is kept in mind.”

 

Malhotra further said that the RBI is “in the midst of a review of the inflation targeting framework.” He added, “The Reserve Bank has a view which is communicated to the government, and the final buck is with the government.”

 

The governor emphasised India’s approach to balancing institutional autonomy and oversight. “India has tried to balance goals of independence of RBI on the one hand, and accountability,” he said. “India has done very well in giving the RBI the independence where it is required, but with accountability.”

 

Reflecting on the economic challenges, Malhotra said, “The last five years were defined by supply chain shocks that have left scars,” with Covid and Russia-Ukraine conflicts as examples.

 

The governor also noted that during that time, “Multidecadal high inflation was seen in many economies. Adverse weather effects, spillovers left inflation above 4 per cent in India with sharp increase in global commodity prices, domestic food prices.”

 

Malhotra highlighted the limitations of policy tools during these shocks. “Monetary policy is ineffective to deal with supply side inflation,” he said.

 

Malhotra added that one of the “key learnings for RBI has been the importance of well laid out exit policies for supply and demand side interventions during crisis.” By February 2025, he said, “inflation was well within the 4 per cent target.”

 

He also said that the last two decades have been, to put it mildly, a lesson in humility for the central bankers. “They have traversed through a past period of deceptive calm to one of perpetual crisis management, one after the other, in the last two decades or so.

 

The standard models that the central bankers have relied on, which assume a certain level of stability and predictable relationships, are creaking under the strain of these new realities.

 

Their explanatory and predictive power is being questioned. This brings us to the crucial point, which is the role of the central banks. The very nature of their roles has evolved in many economies, from fine-tuning stable economies to act now as the first line of defence against a series of unprecedented and sometimes overlapping global shocks,” he said.

 

“This reminds me of an old mariner's wisdom. You cannot control the storm, but you can certainly steer the ship. That's what the central bankers are meant for,” added the RBI governor.