‘Not a matter of huge concern’: RBI chief Sanjay Malhotra on US’ 50% tariffs

Reserve Bank of India (RBI) Governor Sanjay Malhotra has stated that the US tariff measures under President Donald Trump do not pose a significant risk to India’s economy, emphasising the country’s resilience due to its domestic-driven nature. “India is mostly a domestically driven economy, so while we are impacted, it’s not a matter of huge concern,” Malhotra said on the sidelines of the IMF and World Bank Fall Meetings in Washington, DC. 

At the IMF’s Governor Talks session, Malhotra highlighted the unpredictable global environment. “We are living in times of unprecedented uncertainties on account of various reasons, including policy uncertainties,” he said. “It is a risk that all emerging market economies must take into account.” 

Despite these headwinds, Malhotra conveyed that India’s macroeconomic situation remains strong, attributing resilience to prudent policies and robust domestic activity. He also indicated cautious optimism for ongoing trade discussions with Washington, mentioning a possible “potential upside” if negotiations progress swiftly.

Malhotra addressed the recent volatility in the Indian rupee, which has faced pressure amid tariff announcements. He reiterated the RBI’s approach: “We believe in the markets to decide what the level should be.” “Our effort really is to ensure there is an orderly movement of the rupee both sides, and that any abnormal volatility is curbed,” he added. The RBI’s interventions have helped prevent the rupee from breaching its record low of 88.80, last seen on September 30.

Minutes from the Reserve Bank’s monetary policy committee (MPC) showed unanimous support among its six members for leaving the repo rate unchanged at 5.5 per cent. The committee cited persistent global uncertainty, despite stable domestic inflation, as grounds for its decision. 

The next policy review by the MPC is scheduled for December 3-5. Malhotra noted that “the softer outlook for both headline and core inflation – following a downward revision in projections – provides policy space to further support economic growth.”

Regarding the interest rate outlook, Malhotra stated, “Even though there is a policy space to further cut the policy rate, I feel this is not the opportune time for the same, as it will not have the desirable impact.” He added, “Therefore, I vote to keep the policy repo rate unchanged at 5.50 per cent. The intent of policy, nevertheless, is to continue to facilitate growth-enabling conditions,” according to the MPC minutes concluded on October 1.