Reserve Bank of India (RBI) Governor Sanjay Malhotra on Wednesday invoked a Mahabharat reference when asked about the extent to which monetary policy would need to support economic growth in the current global economic climate.
“I am Sanjay, but not the Sanjay of Mahabharat to be able to foresee that far,” said the Governor, referring to the mythological figure Sanjay, who was believed to possess divine sight. “I do not have that divine vision that he had.”
Expanding on the central bank’s position, Malhotra said, “The government has done its bit in the Budget, and we have responded with a rate cut and an accommodative stance. Where this will lead, we do not yet know. But we will work together to manage the growth and inflation dynamic.”
RBI MPC rate cut and economic outlook
The RBI’s Monetary Policy Committee (MPC), led by Malhotra, reduced the repo rate by 25 basis points to 6 per cent, marking the second cut this year. Additionally, the central bank shifted its stance from neutral to accommodative, indicating the possibility of further rate cuts if economic conditions require.
“The domestic growth-inflation trajectory demands monetary policy to be growth-supportive while being watchful on the inflation front,” Malhotra stated. “We are aiming for non-inflationary growth built on improved demand and supply responses and sustained macroeconomic balance.”
Despite these measures, the RBI revised its GDP growth projection for financial year 2025-26 downward from 6.7 per cent to 6.5 per cent, citing uncertainties stemming from global trade tensions due to US President Donald Trump imposing retaliatory tariffs. The Governor pointed to the US. trade tariffs as a significant risk factor, warning that they had “exacerbated uncertainties clouding the economic outlook across regions, posing new headwinds for global growth and inflation.”
Global economic uncertainty and inflation
Governor Malhotra stated that the year had begun on an “anxious note” for the global economy, with trade frictions unsettling financial markets. “The global economic outlook is fast changing,” he noted. “Amid this turbulence, the US dollar has weakened appreciably; bond yields have softened significantly; equity markets are correcting; and crude oil prices have fallen to their lowest in over three years.”
Inflation, however, offered a silver lining. India’s retail inflation eased to a seven-month low of 3.61 per cent in February 2025, bringing it below the RBI’s mid-term target of 4 per cent for the first time in several months. Malhotra credited this to a “decisive improvement in the inflation outlook” driven by lower food prices. However, he cautioned that global uncertainties and potential weather-related supply disruptions could still impact price stability in the coming months.
“As before, we shall remain agile and decisive in our response and put in place policies that are clear, consistent, credible, and in the best interest of the economy,” Malhotra asserted.
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