RBI Governor Sanjay Malhotra expressed optimism about the Indian economy's recovery and growth in 2025, citing high consumer and business confidence as key drivers.
Speaking in the foreword of the Financial Stability Report, Malhotra emphasized the importance of financial stability in achieving a sustainable growth trajectory.
Malhotra noted that while the Indian economy faced a slowdown in the first half of the current financial year due to global uncertainties, growth is expected to accelerate in the latter half. He attributed this improvement to strong corporate balance sheets, high profitability, and a brighter investment landscape.
“Despite global macro-financial uncertainties, the Indian economy is poised to pick up pace. Consumer and business confidence remain robust, and corporations are stepping into 2025 with strengthened financial health,” he said.
The RBI Governor, who assumed office earlier this month, also addressed the slowdown in GDP growth, which dipped to 5.4% in Q2 of FY2024-25, marking a seven-quarter low. For the first half of the year, GDP growth was recorded at 6%.
The slowdown, coupled with moderating inflation, has fueled speculation that the RBI may reduce policy rates in the upcoming Monetary Policy Committee meeting. Malhotra stressed the need to maintain systemic financial stability, highlighting the resilience of India's financial institutions.
"Stress tests show that the capital levels in both banking and non-banking financial sectors remain well above the regulatory minimum, even under adverse scenarios," he added.
The Governor also emphasized ongoing reforms and enhanced surveillance in the financial sector, aimed at bolstering earnings, reducing impaired assets, and maintaining strong capital buffers.
On the global front, Malhotra acknowledged the resilience of the world economy amid political and economic policy uncertainties, persistent conflicts, and trade disruptions. He highlighted encouraging signs, including declining inflation and improving financial conditions, which could support global GDP growth.
However, he cautioned against medium-term risks, including geopolitical tensions, climate-related events, financial market instability, and challenges posed by new technologies.
Malhotra reiterated the RBI's commitment to developing a modern, inclusive financial system. “We aim to secure public trust by fostering a technologically advanced and customer-centric financial environment,” he said.