RBI Governor Sanjay Malhotra shares key insights on economy, business optimism for 2025. Here’s what he said 

Amid government criticism over the Reserve Bank of India’s (RBI) focus on inflation control rather than economic growth, the newly-appointed RBI Governor, Sanjay Malhotra, on December 30 said that the Indian economy is expected to show improvement in 2025, driven by strong consumer and business confidence. 

In the foreword to the Financial Stability Report, Malhotra emphasised the RBI’s commitment to maintaining financial stability, which he sees as crucial to supporting sustained growth for the Indian economy. “While we work to ensure the stability of financial institutions and broader systemic stability, our goal remains focused on fostering a higher growth trajectory,” he said. 

Malhotra also noted that despite global uncertainties, India’s economy is likely to gain momentum in the latter half of the current financial year. “Despite the ongoing global macro-financial challenges, the Indian economy is expected to regain its pace after the slowdown in the first half of 2024-25,” he said. “Consumer and business confidence remains high, and the investment climate looks promising, as companies enter 2025 with strong balance sheets and healthy profits.” 

The Finance Ministry, in its November Monthly Economic Review, had pointed to potential structural factors contributing to the slowdown in the first half of 2024-25. India’s GDP growth fell to a seven-quarter low of 5.4% for the second quarter ending September 2024, bringing the first-half GDP growth to 6%. 

The slowdown, coupled with moderating inflation, is increasing expectations that the RBI may lower its policy rate in the upcoming Monetary Policy Committee meeting. 

Malhotra further emphasized that financial sector regulators in India are pushing forward with reforms and enhancing surveillance. He highlighted the strength of the financial system, bolstered by solid earnings, low impaired assets, and strong capital buffers. The results of stress tests indicate that both the banking sector and non-banking financial companies (NBFCs) will maintain capital levels well above regulatory minimums, even under stress scenarios. 

“We continue to build and secure public trust, supporting India’s aspirational goals. We are committed to developing a modern financial system that is customer-centric, technologically advanced, and financially inclusive,” he said. 

Regarding the global economy, Malhotra acknowledged the resilience in the face of significant challenges, such as political and economic policy uncertainty, ongoing conflicts, and the fragmentation of international trade. However, he noted that global prospects are brightening, with inflation expected to continue its decline, supporting purchasing power recovery. As monetary policy gains more room to support economic activity, favorable financial conditions are expected to boost global GDP growth after a prolonged period of low growth. 

Although the outlook appears promising, Malhotra warned that medium-term risks persist, including potential escalation of geopolitical conflicts, financial market instability, extreme climate events, and rising debt levels. Additional uncertainties come from stretched asset valuations, vulnerabilities in less regulated non-bank financial intermediaries, and the challenges posed by emerging technologies.