RBI Governor Sanjay Malhotra Warns of Global Economic Risks

Reserve Bank of India Governor Sanjay Malhotra warned that geo-economic fragmentation, driven by trade restrictions and tariffs, is disrupting global capital flows and reshaping supply chains. Speaking at the 25th FIMMDA-PDAI Annual Conference in Amsterdam, Malhotra identified several systemic risks, including stretched technology sector valuations, the opacity of private credit markets, and the uncertain impact of artificial intelligence on employment and productivity.

Malhotra cautioned that high public debt in major economies, continued fiscal expansion abroad, and rising defense spending amid geopolitical tensions could strain global fiscal sustainability. He noted that disrupted supply chains and energy price volatility have already impacted activity, warning that prolonged crises could lead to second-order inflationary pressures.

Despite these headwinds, Malhotra asserted that India's macroeconomic fundamentals remain robust, citing an average growth rate of 8.2% between 2021-25. He projected growth of 7.6% for 2025-26 and 6.9% for 2026-27, supported by resilient foreign exchange reserves and domestic demand. To mitigate global uncertainty, the Reserve Bank of India is focusing on deepening financial markets and strengthening institutional frameworks. Key initiatives include enhancing G-sec liquidity, expanding the FX Retail platform, and introducing total return swaps on corporate bonds.