Inflation control remains our primary mandate, growth follows: RBI Guv

The Reserve Bank of India (RBI) will continue to prioritise inflation while supporting economic growth, Governor Sanjay Malhotra said, adding that low and stable inflation provides the foundation for sustainable growth by enabling businesses and households to make long-term investment decisions.

In an interview with Doordarshan, Malhotra said inflation control remained the RBI's primary mandate under the flexible inflation-targeting framework, while growth was its secondary objective. “They are not in opposition. They support each other,” he said, noting that stable prices improve economic planning and investment decisions.

The governor said India's macroeconomic fundamentals remained strong despite global uncertainties. The central bank expects the economy to grow 6.6 per cent in the current financial year, supported by sound monetary, fiscal and industrial policies.

He said risks from geopolitical tensions, particularly in West Asia, and weather-related uncertainties linked to the monsoon remained key concerns, though the economy was well placed to deal with external shocks.

On monetary policy, Malhotra said the RBI looked beyond headline consumer price inflation and closely monitored its composition, including core inflation and the underlying drivers of price pressures, before taking policy decisions.

“The target is headline CPI inflation, but we also closely examine its composition, core inflation and the reasons behind price movements,” he said.

The governor said credit growth remained broad-based across sectors. Overall bank credit grew around 18 per cent year-on-year in June, while sectoral data for May showed credit growth of around 15 per cent for agriculture, 17 per cent for industry, 24-25 per cent for micro, small and medium enterprises (MSMEs), 11-12 per cent for infrastructure and about 11 per cent for housing.

While gold loans have witnessed rapid expansion, Malhotra said the RBI did not see any immediate concern in any particular segment. “We continuously monitor all sectors, banks and regulated entities. At present, we do not see any danger in any sector,” he said.

On the rupee, the governor said the Indian currency had remained relatively stable compared with its global peers despite the recent strengthening of the US dollar following geopolitical tensions.

He said recent government measures, including tax exemptions on investments in government securities, expansion of the Fully Accessible Route (FAR) for longer-tenor sovereign bonds, and continued strength in services exports and remittance inflows, would support India's external sector.

Malhotra also highlighted record gross foreign direct investment (FDI) inflows of about $95 billion last year and said net FDI inflows during the first two months of the current financial year stood at around $7 billion.

He added that free trade agreements with the UK and other economies were expected to boost exports and strengthen the current account over time.

On financial sector stability, the governor said Indian banks remained well capitalised, with capital adequacy exceeding 17 per cent and liquidity coverage ratios at around 120 per cent.

Addressing concerns over digital fraud, Malhotra said the RBI had strengthened its supervisory framework with a greater focus on proactive and pre-emptive intervention. He also referred to the limited liability framework, scheduled to be implemented from January 2027, under which customers will receive compensation of up to Rs 25,000 in specified cases of small-value digital payment fraud.

On artificial intelligence, Malhotra said the RBI had encouraged banks to adopt AI to improve customer service, lower operating costs and enhance decision-making, while ensuring safeguards against cybersecurity and data privacy risks.

For retail investors, the governor said increasing participation in mutual funds and other market-linked products reflected healthy diversification. However, he advised investors to determine their asset allocation based on their financial needs, investment horizon and risk appetite.

Describing global uncertainty as India's biggest economic challenge, Malhotra said the country's policy framework and macroeconomic strength provided confidence that it could navigate external risks.