Reserve Bank of India (RBI) Governor Sanjay Malhotra has said that future monetary policy decisions will depend on how price pressures evolve and whether they become broad-based and persistent.
Addressing the post-policy press conference, Malhotra said the central bank remains data-dependent and would not hesitate to act if inflation starts feeding into expectations, even as he stressed that temporary price shocks may not warrant immediate policy intervention.
"The inflation outlook is certainly more adverse than before. If inflation becomes generalized, persistent and starts influencing inflation expectations, policy action may become necessary," the governor said.
The comments come after the RBI revised its inflation projections upward, citing higher crude oil prices and supply-side uncertainties. Malhotra disclosed that the central bank's latest forecasts are based on a crude oil assumption of $95 per barrel, higher than earlier estimates.
Despite concerns over inflation, the governor refrained from offering forward guidance on interest rates, saying every Monetary Policy Committee (MPC) meeting evaluates all possibilities, including rate hikes, a pause, or rate cuts, before arriving at a decision.
On the external sector, Malhotra sought to reassure markets that India remains well-positioned to withstand global shocks. He said the country's macroeconomic fundamentals are strong and that the RBI has sufficient buffers to manage potential volatility.
"We have adequate foreign exchange reserves and will do whatever is required to ensure orderly movement in the rupee and healthy capital flows," he said.
The governor also ruled out any consideration of measures to restrict capital outflows, stating that no such proposals are currently under discussion.
Responding to questions on the rupee, Malhotra clarified that he had never described the currency as undervalued. Rather, he had only noted that some analysts believe the rupee may not be overvalued based on metrics such as the Real Effective Exchange Rate (REER).
On liquidity conditions, the governor said the RBI had injected around Rs 2.6 lakh crore into the banking system since the last policy review and would continue to ensure adequate liquidity to support credit growth and economic activity. However, he reiterated that the central bank does not target a specific liquidity level.
Malhotra also urged banks to pass on at least part of the benefits arising from lower hedging costs under the measures announced by the RBI. He added that healthy competition for deposits is welcome, provided it remains transparent and fair.
Addressing concerns over the RBI's gold reserves, the governor categorically denied reports that the central bank had sold gold. He explained that changes in the value of gold reserves reflected weekly mark-to-market valuation changes rather than any reduction in physical holdings.
"RBI has not sold gold. There has only been a marginal increase in our gold holdings," he said.
On capital inflows, Malhotra expressed confidence that the RBI's latest measures for non-resident deposits and external borrowings would attract "substantial and healthy" inflows, although he declined to provide a specific estimate.
The governor identified the duration of supply disruptions linked to ongoing geopolitical conflicts, crude oil prices, monsoon performance and the possibility of El Niño as key risks being monitored by the central bank.
He also sought to allay concerns over food inflation arising from fertilizer availability, stating that India has adequate stocks for the upcoming kharif season.
On foreign direct investment (FDI), RBI officials highlighted that gross inflows reached around $95 billion in FY26, while investment indicators such as capital goods imports and fixed-asset formation remain encouraging.
Overall, the RBI's message was one of cautious vigilance: inflation risks have intensified, but policy action will depend on incoming data, while the central bank remains confident in the resilience of India's economy and financial system.
