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Reserve Bank of India Governor Sanjay Malhotra believes that interest rates are going to remain low for a long time. The latest projection of RBI clearly indicates that no sharp increase in interest rates is expected right now. If a deal is made with America and Europe, India’s growth rate can get a big support. What else did Sanjay Malhotra say? Know…
There was a time when people were not able to understand where interest rates would go in the coming months, but now the picture is clearer than ever. The pace of the Indian economy is fast, foreign trade agreements can open up new opportunities, and that is why RBI Governor Sanjay Malhotra believes that interest rates in the country are going to remain low for a long time. He said this in an interview given to the Financial Times, in which he spoke openly about India’s economic health and future direction.
Malhotra said that the latest projection of RBI clearly indicates that no sharp increase in interest rates is expected right now. Earlier this month, the Monetary Policy Committee (MPC) had unanimously reduced the repo rate by 25 basis points to 5.25 percent. According to him, this step was absolutely appropriate considering the strength of the economy and future prospects.
Impact of deals with America and Europe
He also clarified that RBI’s economic forecast has not yet included the impact of possible trade agreements with America and Europe. If these deals are completed, India’s growth rate can get a big support. He said that even the agreement with America alone can help in increasing the GDP by about half a percent.
The Governor admitted that RBI will have to improve its GDP forecasting, as the latest figure for the July-September quarter was much higher, i.e. 8.2 percent, compared to the estimate of 7 percent. However, he also indicated that growth may slow down a bit in the coming times, as the tariffs increased by 50 percent by the US may put pressure on India’s exports, especially the textile and chemical sectors.
RBI is making every effort
The pressure of the tariffs imposed by US President Donald Trump is already visible on the world’s fifth largest economy. Trade deficit has increased and the rupee has also been affected. Amidst these challenges, RBI not only reduced the repo rate in December, but also took steps to provide additional liquidity of up to $16 billion to strengthen the banking system, so that the economy remains in ‘Goldilocks’ state.
Responding to the doubts being raised over the quality of India’s economic data, Malhotra said that slight differences in the data of any big country are normal and the figures are also revised later. He clarified that this difference should be kept in mind while making policy, but overall India’s data is reliable and strong.
