India central bank chief says RBI hasn’t ‘lost sight’ of growth

[MUMBAI] India’s central bank has not “lost sight” of its growth objective, even as price stability remains its primary mandate, governor Sanjay Malhotra said on Monday (Aug 25).

“The primary objective of monetary policy in terms of price stability has significantly contributed to the strength of India’s micro fundamentals,” Malhotra said at a banking industry event in Mumbai. “At the same time, monetary policy has not lost sight of its objective of growth.”

Malhotra’s remarks come just two days before the US enforces President Donald Trump’s additional 25 per cent tariff hike on Indian imports, which would take cumulative levies to 50 per cent – among the highest on any major economy’s products – and could shave 0.6 to 0.8 percentage points off India’s annual growth, according to Citigroup estimates.

To cushion the tariff shock, India’s government is exploring ways to bolster the domestic economy. Prime Minister Narendra Modi announced earlier this month plans to overhaul the complex goods and services tax, a move aimed at boosting consumer spending.

India’s central bank left the repurchase rate unchanged at its August policy meeting, as policymakers sought to assess the impact of tariff-related uncertainties on Asia’s third-largest economy. Before that, the Reserve Bank of India had lowered the benchmark rate by 100 basis points since February.

However, benign inflation may give policymakers scope to ease further in the coming months if growth falters. In July, the inflation rate fell below the central bank’s target band for the first time in eight years. BLOOMBERG