West Asia crisis, uncertain monsoon major risks for growth: RBI Governor

Reserve Bank Governor Sanjay Malhotra has said the West Asia crisis and the expectation of a weak monsoon present significant risks to economic growth.

"Despite global uncertainties, India has witnessed an over 7 per cent growth rate in the past few years. Last financial year, India clocked a growth rate of 7.7 per cent supported by strong and robust macroeconomic fundamentals," he said in an interview to DD News.

The Reserve Bank of India (RBI) has projected a GDP growth of 6.6 per cent for the current financial year despite various challenges, he said.

"Monetary and fiscal policies are robust, and because of that, we are witnessing high GDP growth," the governor added.

On inflation, he said the central bank has raised its inflation forecast to 5.1 per cent for FY27, higher from its earlier estimate of 4.6 per cent.

Inflation going past the Reserve Bank’s median target of 4 per cent in June was largely driven by supply-side factors, Malhotra noted.

Retail inflation climbed to 4.38 per cent in June from 3.93 per cent in May, mainly due to costlier food items.

The food inflation increased to 5.32 per cent in June from 4.78 per cent in the preceding month.

Talking about another risk factor, Malhotra said that how the monsoon behaves is crucial, as a large population depends on the agriculture sector.

Agriculture contributes about 17 per cent to the GDP, he said, adding that "we have to be vigilant about that (monsoon)."

On the rupee depreciation, Malhotra said the domestic currency performance against peers remains stable despite a stronger dollar and heightened global uncertainty.

"After the war in West Asia, the dollar has become strong. The currencies of many countries have weakened. If we look at it from a global perspective, India's rupee situation can be considered normal," he said.