New RBI Governor Sanjay Malhotra has responded to the government’s worries about the Reserve Bank of India’s (RBI) focus on controlling inflation instead of promoting growth. He believes that the Indian economy will improve in 2025, thanks to strong confidence from consumers and businesses.
Malhotra emphasized the importance of financial stability to support better economic growth. He mentioned that, despite challenges from around the world, India’s economy should start growing again in the latter half of this financial year. While the economy slowed down earlier—recording a GDP growth of just 5.4% in the second quarter—it is expected to bounce back in 2025 as companies prepare for more investment with healthy profits.
In a recent report, the Finance Ministry pointed out that lower growth rates in the first half of the year could be caused by structural issues in the economy. The RBI is likely to consider reducing interest rates in its upcoming meeting due to this slowdown and decreasing inflation.
Malhotra also noted that financial regulators in India are working hard to enhance reforms to ensure a strong financial system, which includes solid bank earnings and low bad debt. The banking system and Non-Banking Financial Companies (NBFCs) are expected to maintain strong capital even in tough situations.
He reassured that India is focused on creating a modern financial system that serves its citizens well and encourages inclusive growth. Worldwide, Malhotra sees signs of improvement as inflation might decline, helping people regain their purchasing power.
He also pointed out, though, that the road ahead could be tough due to possible political conflicts, unpredictable financial markets, extreme weather events, and rising debts. The uncertain situation also includes concerns about asset prices, weaker financial measures from non-bank lenders, and new technologies.
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