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Informist, Monday, Apr. 20, 2026

 

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--RBI Malhotra: Important to maintain broad policy stance amid current crisis 
--CONTEXT: RBI Malhotra's address at Princeton University Sat 
--RBI Malhotra: Inflation expectations better anchored, less volatile 
--RBI Malhotra: Fiscal consolidation has progressed steadily in recent years 
--RBI Malhotra: To sacrifice some short-term upside for long-term growth 
--RBI Malhotra: India fincl system healthy, resilient; supporting econ growth

 

MUMBAI – It is important to maintain a broad policy stance and refrain from making "firm commitments of the future path of policy" in times of uncertainty such as the current West Asia crisis, Reserve Bank of India Governor Sanjay Malhotra said in a speech at Princeton University Saturday. A neutral stance--which the central bank's Monetary Policy Committee has maintained since June--retains flexibility for policy response depending on the evolution of inflation and growth dynamics, Malhotra said. 

 

The central bank is currently in wait-and-watch mode and in such scenarios, the RBI has been "even more data dependent" and continuously reassess risks, Malhotra said. It is crucial to be "agile and nimble", Malhotra said. 

 

Malhotra flagged "second-round effects" as the real concern to current supply shocks due to the West Asia war which can materialise if disruptions to supply chains persist for long. Such shocks could get entrenched in general prices and which is what monetary policy should prevent by influencing inflation expectations instead of outright suppressing demand, Malhotra said. Current inflation expectations are "better anchored" and "less volatile", the governor said. The central bank has been willing to forego some short-term upsides to ensure long-term growth, Malhotra said. The Indian financial system is currently healthy and resilient due to several measure taken by the RBI in the past decade; and supports economic growth, the governor said. 

 

Malhotra also said that clear communication of the RBI's strategy and policy decisions brings clarity of its approach, helping in increasing transparency and anchoring inflation expectations. Anchoring such expectations is an important objective of the central bank which it pursues by utilising various tools such as providing forward guidance. 

 

Fiscal policy adopted by the government to keep supply-side pressures in check has also aided monetary policy, the governor said. Fiscal consolidation has improved steadily over the years, with better tax collection efficiency and enhanced quality of expenditure. Digitisation of tax collection and assessment, along with rationalisation of goods and services tax have improved tax buoyancy, the governor said. During the West Asia crisis, oil marketing companies and the Centre have absorbed the rise in oil prices, while passing on some of price rise in gas to consumers, Malhotra said.   End

 

Reported by Cassandra Carvalho

Edited by Akul Nishant Akhoury

 

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