Indian macroeconomic fundamentals are very strong; US tariffs not too concerning: RBI Governor

By R Anil Kumar

Washington DC. Reserve Bank of India Governor Sanjay Malhotra highlighted India’s strong macroeconomic fundamentals and deep markets, noting that domestic demand shields the economy from US tariffs.

Speaking at the IMF and World Bank Group’s annual meetings in Washington DC, Malhotra said that economic indicators suggest “capacity utilisation is increasing,” and added that the US’ 50% tariffs would do little to harm India’s economic balance sheet.

“There is better investment sentiment in businesses, still there is that uncertainty which is holding back on the animal spirits,” he said, noting that India remains a largely domestically driven economy. While tariffs have had an impact, Malhotra added, it is “not a matter of huge concern.”

The RBI Governor made the remarks in conversation with Krishna Srinivasan, Director of the IMF’s Asia and Pacific Department.

Acknowledging broader global challenges, Malhotra said, “We are living in times of unprecedented uncertainties on account of various reasons, including policy uncertainties.” Such conditions, he added, “have been challenging for Emerging Market (EM) growth,” and are “a risk that all EM economies must take into account.”
India managed inflation very well despite headwinds: Guv

On the impact of inflation and global shocks, the RBI chief said that while inflation has been elevated, it has moderated significantly from the highs of 2022.

“India bounced back from Covid, the implications of Russia-Ukraine war; we have managed inflation very well—it has come down to 1.5%—the lowest in 8 years,” he said. He also noted that the Consumer Price Index(CPI) basket in India largely comprises of food inflation, which “becomes challenging” to navigate.

However, Malhotra highlighted that India’s growth trajectory has been strong, with average projections above 8 percent over the past year.

He said fiscal deficit is now at a manageable level, projected at 4.4 percent of GDP for the Centre, and total debt remains among the lowest globally. The RBI chief credited “good coordination between govt, fiscal authorities” for these outcomes.
On currency movements, he said the dollar depreciated by 10 percent, while the Indian rupee has not appreciated as much, unlike many other currencies. This, he said, is due to larger tariffs and capital outflows.

On the rupee, Malhotra reiterated, “We believe in the markets to decide what the level should be… Our effort really is to ensure that there is an orderly movement of the rupee both sides, and any undue or any abnormal volatility is curbed.” He also said the RBI “does not target any price level on the rupee.”
CBDC over cryptocurrencies

Malhotra also said the RBI wants to promote its Central Bank Digital Currency (CBDC) over stablecoins or cryptocurrencies. Earlier this month, RBI launched a retail sandbox for CBDC, allowing fintech firms to build and test solutions as part of the ongoing pilot.

Malhotra also noted that global growth remains subdued, with countries increasingly looking inward. He added that multiple factors—including export opportunities and tariffs—will influence how the rupee and the local economy perform.

He observed that households and businesses are currently delaying investments and expenditures, reflecting caution amid uncertainty.

The RBI Governor also emphasized the successful management of inflation, which has significantly moderated from 2022 highs, and expressed the RBI’s commitment to market-determined rupee movements.

Sanjay Malhotra said interest-rate hikes and coordinated efforts by fiscal policymakers helped bring inflation to an eight-year low of 1.5 percent.

“We have been able to manage our inflation very well,” Malhotra said in a Governor Talks discussion Wednesday,15 October, with IMF Asia and Pacific Department Director Krishna Srinivasan. “So, since February now, we have been supporting growth.”

Malhotra touched on Central Bank Digital Currencies (CBDC), which he said aren’t needed domestically because India already has a cheap, fast, and efficient payment system.

“CBDC actually is the answer for cross-border payments,” he said, urging global central banks to pursue and promote digital versions of their official currency. “We need to promote the CBDC because this has huge advantages over stablecoins. It is fiat.”

Indian markets are “quite deep,” and the country’s macroeconomic fundamentals are “very strong,” Sanjay Malhotra said striking a confident note amid global uncertainty.