MUMBAI: Reserve Bank governor Sanjay Malhotra, who chairs the rate-setting monetary policy committee (MPC), has said that despite global investors remaining nervous and financial markets volatile, the domestic growth drivers are firing from almost all cylinders. He added that the growth outlook remains robust with benign inflation and a growth-supportive budget along with trade deals.
According to the minutes of the February 4-6 monetary policy meeting released by the RBI Friday, it was decided to leave the repo rate unchanged in a unanimous vote and also maintain the neutral policy stance, though the external member Ram Singh wanted it to be accommodative.
Lauding the growth-supportive measures in budget 2027, Malhotra said, “These steps will further boost growth and the US, EU trade deals have improved the external sector outlook. In fact, the country is in a similar or a tad better position than the last policy.”
"Despite escalating geopolitical tensions and increasing trade frictions posing huge challenges, global growth, supported by a surge in technology-related investments, conducive fiscal and monetary policies, and accommodative financial conditions, is expected to be marginally higher in 2026.
“Inflation outcomes may remain divergent across countries; accordingly, central banks are likely to tread dissimilar policy paths while approaching the end of their easing cycles. In the backdrop of large fiscal stimulus and geopolitical uncertainty, global investor sentiments are nervous and financial markets remain volatile," said Malhotra, according to the minutes released Friday.
"Global growth is expected to be marginally higher in 2026. Given the present state of domestic economy and its outlook, buoyant growth and benign inflation, the current policy rate is appropriate," Malhotra said further.
Deputy governor Poonam Gupta who is in charge of the monetary policy department said, "GDP growth is turning out to be quite robust, the momentum to stay in FY27. Inflation is likely to stay benign across sectors, going into FY27."
"Risk to inflation from external sources is perceived to be limited. No risk of buoyant economic activity resulting in higher CPI is also seen. Future course of policy action ought to be data dependent," she added.
Ram Singh, an external member, who wanted the policy stance to be changed to accommodative, said domestic growth drivers continue to be robust. "Trade deals to strengthen exports, bring in higher investments. Growth is looking up while inflation outlook remains broadly unchanged," said Singh.
External member Nagesh Kumara also said the economic outlook for the economy has brightened considerably since the December 2025 meeting on the back of the long-pending EU-India FTA, followed by the US-India trade deal, which have helped lift the sentiment.
“The most important implication of the new trade deals is that India is back at the table as the most promising destination for China+1 supply chain restructuring, given its large and fast growing domestic market, abundant skills, a robust and stable economic framework, fast improving infrastructure and logistics, with zero duty access to virtually entire European market (considering the EFTA, UK and EU deals), Australia, UAE, Japan, Korea, among other markets, and access to the US market at 18% tariff level, which is comparable to its peers, if not better. This brightens the outlook for FDI inflows and for manufacturing,” he said.
Another external member Saugata Bhattacharya said overall, high frequency indicators signal resilience in economic activity. The new GDP, CPI inflation and IIP series are designed to better capture economic activity and price formation. These data series will provide a clearer lens on the growth–inflation balance.
Indranil Bhattacharyya, another external member, said notwithstanding an escalation of geopolitical strife amidst intensifying tariff wars between transatlantic allies, global growth projections for 2026 has been revised upwards. At the same time, domestic economic activity remains robust with various high frequency indicators bearing testimony to the continued resilience of the economy.
“With headline inflation remaining well below the target throughout 2025-26 and projected at around the target in H1:2026-27, the current policy rate and the stance offers scope for remaining growth-supportive without stoking inflation,” he said.