Inflation ‘a bit elevated’, but RBI isn’t hitting the brakes: here’s why

India’s central bank appears willing to tolerate a period of elevated inflation and fast credit growth rather than step in with tighter policy, based on comments from RBI Governor Sanjay Malhotra in an interview with Doordarshan News.

Malhotra struck a composed tone throughout, describing inflation as “currently a bit elevated” but still broadly under control, and pointed to supply-side disturbances as the main driver rather than excess demand. Consumer price inflation is projected at approximately 5.1% for the year, a level he acknowledged is “slightly above our target.”

Rather than reacting to the headline inflation figure, the governor said the RBI examines what is driving it. “When we talk about headline inflation…we also look closely at its composition,” he said, noting the current increase is driven by specific sectors and supply shocks rather than an economy-wide overheating.

On growth, Malhotra said the economy remains resilient despite ongoing global turbulence, with domestic demand and investment providing support. He framed the RBI’s twin goals of price stability and growth as mutually reinforcing rather than competing: “these two objectives are not contradictory. They support each other,” he said.

The governor also addressed credit growth, which he said is running close to 18% overall, with MSME loans and gold loans expanding faster still, at 24-25%. He drew a contrast with the microfinance sector’s troubles roughly two years ago, saying the RBI currently sees “no immediate distress” even as it keeps a close watch on these fast-growing loan categories for early signs of stress.

Malhotra’s comments suggest the RBI’s near-term stance will favour sustaining credit availability and growth momentum, while continuing to track the underlying composition of inflation and credit expansion rather than making a reactive policy shift.

Wikimedia Commons/by Nichalp