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Informist, Friday, Apr. 18, 2025

 

NEW DELHI – The Reserve Bank of India has been doing whatever is required to limit the impact of global uncertainty on the domestic economy over the past few months, Governor Sanjay Malhotra said Friday, according to officials attending the annual Fixed Income Money Market and Derivatives Association of India-Primary Dealers Association of India conference at Bali, Indonesia.

 

The RBI has been trying to take stock of the evolving global situation on a proactive note, according to the governor. The central bank's aim is to ease the uncertainty and get growth and inflation back to the best condition possible, Malhotra said. He said the central bank was taking both monetary policy and regulatory measures, among others, to help improve economic conditions.

 

The RBI's Monetary Policy Committee has cut the policy repo rate by 25 basis points each in its February and April reviews. Amid a heavy liquidity deficit in the banking system at the beginning of the year, the central bank is set to inject INR 4 trillion of durable liquidity through open market bond purchases by the end of April, as well as another $25 billion worth of rupee liquidity through dollar/rupee swap operations.

 

It has also conducted daily variable rate repo operations since mid-January to address frictional liquidity demands. It has also pushed back the imposition of enhanced liquidity coverage ratio norms that were scheduled to kick in on Apr. 1, which was seen pulling down loan growth.

 

India entered 2025 with comfortable trajectory on its macroeconomic indicators, with inflation trending downwards, the governor said. However, uncertainty has spiked far more than expected on the global front and a smooth transition has been belied, Malhotra said. New US President Donald Trump's administration unveiled sweeping tariffs on several key trade partners early in April, then rolled them back a week later while escalating a trade war with China, the world's second-largest economy.

 

Analysts expect the tariffs and potential supply chain disruptions to pull down  India's GDP growth close to 6% in 2025-26 (Apr-Mar), well below the central bank's latest projection of 6.5% last week. Inflation too is expected to be near or below the RBI's 4% medium-term target through 2025, according to estimates by the central bank and economists alike.

 

Malhotra said India would soon become the world's third-largest economy and was on the cusp of a transformation in its economy. He underscored the challenges and opportunities going ahead, including leveraging India's demographic dividend, skilled manpower and technological know-how. Speaking to representatives primarily from the fixed income markets, the RBI governor stressed the importance of stable and deep financial markets in ensuring economic growth.  End

 

US$1 = INR 85.37

 

Reported by Aaryan Khanna

Edited by Vandana Hingorani

 

 

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