Global economic sentiments may be edgy but Indian economy is resilient: RBI

Even as the global economic sentiments are edgy, India is in a rather comfortable situation, indicated Reserve Bank of India (RBI) Governor Sanjay Malhotra in his Monetary Policy Committee (MPC) announcements on Wednesday.

While increasing the repo rate by 25 bps to 5.5 per cent, Malhotra said that while geopolitical developments remained challenging, the Indian economy has been strong, and the economic momentum remained broad-based. Moreover, the economy is expected to remain resilient, he said.

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“Summing up, the West Asia conflict, tariff related uncertainties, elevated bond yields and risks of an unwieldy correction in valuation of AI stocks are keeping global economic sentiments edgy with risk-off sentiments on EMEs. While these factors are weighing on the domestic growth-inflation outlook adversely, the inherent resilience and strength of the Indian economy are helping navigate through these challenging times,” he said in the end. The RBI will implement policies that add to the resilience of the Indian economy, he said.

Talking about the growth numbers in Q1, which were under immense scrutiny, Malhotra said the unexpectedly high 7.8 per cent exhibited resilience amidst global headwinds. Growth was driven by resilient private consumption and strong investment activity while contribution of net exports also remained positive, he said.

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Malhotra acknowledged that global economic uncertainty and supply chain disruptions are expected to have some bearing on domestic economic activity, along with weak southwest monsoon and strong El Niño conditions.

He said that global headwinds from protracted geopolitical tensions, elevated international commodity prices, additional frictions in global trade and tightening of global financial conditions may weigh on growth outlook.