Reserve Bank of India Governor Sanjay Malhotra outlined the central bank's strategic approach to managing India's economy amid global uncertainties, emphasizing institutional independence and data-driven policy decisions in an exclusive interview.

Economic Performance and Growth Outlook

India has emerged as a standout performer among major economies, demonstrating remarkable resilience during challenging global conditions. The Governor highlighted the country's robust growth trajectory, supported by strong domestic demand fundamentals.

The domestic demand-driven growth model has positioned India favorably compared to export-dependent economies, providing greater stability during periods of global uncertainty.

Monetary Policy Framework and Rate Decisions

The central bank implemented significant monetary accommodation, delivering 125 basis points of rate cuts while maintaining focus on domestic growth and inflation dynamics. Governor Malhotra emphasized that policy decisions remain guided primarily by domestic economic conditions rather than external pressures.

Transmission of monetary policy has shown effectiveness across various segments:

Foreign Investment and Financial Sector Strength

The financial sector attracted substantial foreign investment, reflecting confidence in India's long-term growth prospects. In 2025 alone, approximately ₹1,275.00 billion ($15.00 billion) of committed or actual investments flowed into private financial entities.

These inflows represent patient, long-term capital rather than speculative hot money, underscoring investor confidence in the banking system's resilience built over several years through regulatory reforms and institutional strengthening.

Exchange Rate Policy and Rupee Management

Addressing concerns about rupee volatility, Governor Malhotra clarified that RBI does not target specific exchange rate levels. The central bank's intervention strategy focuses on ensuring orderly market movement rather than defending particular thresholds.

The Governor emphasized that currency strength should not be judged solely by exchange rate levels, pointing to India's strong macroeconomic fundamentals including high growth, controlled inflation, substantial forex reserves, and manageable current account deficit.

Inflation Dynamics and Targeting Framework

Current low inflation levels primarily result from food price base effects and soft global commodity prices, representing largely supply-side phenomena. As base effects fade, inflation projections show movement toward the 3.00-4.00% comfort range.

The flexible inflation targeting framework, maintaining the 4.00% target with ±2.00% tolerance band, has contributed to moderating inflation levels since its introduction, though framework modifications remain under government review.

Consumer Protection and Service Enhancement

The central bank prioritized consumer outreach initiatives, recognizing consumers as ultimate beneficiaries of monetary policy. Key improvements include streamlined grievance redressal processes, digitized services, and enhanced delivery mechanisms achieving over 99.50% on-time service delivery.

Source: https://www.ndtvprofit.com/economy-finance/rupee-strategy-to-inflation-target-rbi-governor-on-what-matters-for-indias-economy-read-full-qa

Reserve Bank of India Governor Sanjay Malhotra has emphasized the crucial importance of central bank autonomy during a period of significant turbulence affecting the US Federal Reserve. In an exclusive conversation with NDTV Profit, Malhotra provided a measured defense of central banking independence amid ongoing tensions between the White House and the Federal Reserve.

Central Bank Independence Under Spotlight

The RBI Governor's comments come against the backdrop of unprecedented challenges facing the US Federal Reserve, particularly a criminal investigation launched against Chair Jerome Powell. The probe focuses on alleged irregularities in renovation costs at the Fed's headquarters in Washington, marking the first time a sitting Federal Reserve Chair has faced the threat of criminal indictment.

"Central bank independence, of course, you know, is very important. We have, over the years, moved globally — we have moved towards that for some reason because it's important to separate that from government," Malhotra stated during the interview.

Global Implications and Collective Responsibility

Without directly addressing the specific charges against Powell, Malhotra emphasized the need for a collective commitment to preserving central banking autonomy across jurisdictions. His remarks underscore the broader principle that monetary policy decisions should remain insulated from political interference.

"That is something that we need to all collectively across jurisdictions preserve, and hopefully... that should only improve over the years," the Governor explained.

Market Impact and Unprecedented Situation

The investigation into Powell has sent shockwaves through global financial markets, highlighting the interconnected nature of central banking systems worldwide. The situation represents an extraordinary development in central banking history, with potential implications extending beyond US borders.

Malhotra's emphasis on preserving central bank independence reflects India's commitment to maintaining institutional autonomy in monetary policy formulation, even as global central banking faces unprecedented challenges.

Source: https://www.ndtvprofit.com/exclusive/economy-reserve-bank-of-india-rbi-governor-sanjay-malhotra-central-bank-independence-us-federal-reserve-autonomy-jerome-powell-probe-donald-trump