Global markets could see correction as tech-driven rally seen to override key concerns: RBI governor

RBI governor Sanjay Malhotra

India’s growth record in recent years gives the confidence that the economy can sustain a 7–8 percent growth trajectory, Reserve Bank of India (RBI) governor Sanjay Malhotra said on October 3.

“India's past years’ growth gives us the confidence that India can grow at 7–8 percent,” he said, adding that the central bank’s “primary focus is price stability, but growth also is kept in mind.”

Recently, the RBI revised the gross domestic product (GDP) growth forecast for FY26 upward to 6.8 percent.

Inflation Targeting

Speaking at the Kautilya Economic Conclave in New Delhi, Malhotra said the Reserve Bank is “in the midst of a review of the inflation targeting framework.” He added, “The Reserve Bank has a view which is communicated to the government, and the final buck is with the government.”

The current inflation-targeting framework targets 4 percent inflation (+-2 percent), which is to be reviewed every five years.

RBI’s Autonomy

The governor emphasised India’s approach to balancing institutional autonomy and oversight. “India has tried to balance goals of independence of RBI on the one hand, and accountability,” he said. “India has done very well in giving the Reserve Bank the independence where it is required, but with accountability.”

Reflecting on the economic challenges over the last half decade, Malhotra said, “The last five years were defined by supply chain shocks that have left scars, with Covid, Russia-Ukraine conflicts.

These were unprecedented.” He noted that during that time, “Multidecadal high inflation was seen in many economies. Adverse weather effects, spillovers left inflation above 4 percent in India with sharp increase in global commodity prices, domestic food prices.”

Malhotra highlighted the limitations of policy tools during these shocks. “Monetary policy is ineffective to deal with supply side inflation,” he said, adding that one of the “key learnings for RBI has been the importance of well laid out exit policies for supply and demand side interventions during crisis.” By February 2025, he noted, “inflation was well within the 4 percent target.”

Global Uncertainties

Turning to the global environment, the governor observed, “Despite uncertainties, US tariffs, global growth has been resilient. It needs to be seen how it unfolds.” He cautioned that “fiscally every country is stressed, not apparent how it could be normalised. Lower global growth is a risk for all economies.”

Malhotra pointed to India’s strong macroeconomic position. “India’s macroeconomic fundamentals are strong, low inflation, narrow CAD, strong balance sheets of corporates, high forex reserves showing financial and policy certainty,” he said. He added that “India is seen as an anchor in a volatile world.”

Correction in markets

He added that “central banks are concerned about elevated debt in advanced economies,” and that “global equity markets are led by technology stocks, correction might be in the offing. Inflation is range bound in most economies, though in a higher range.”

On global signals, the governor remarked, “Gold prices are now showing movement, acting as a barometer of global uncertainty.”