RBI Governor flags West Asia conflict, monsoon as key risks to India’s economic growth

18 Jul 2026 Evaluate

Expressing concern over India's growth prospects, Reserve Bank of India (RBI) Governor Sanjay Malhotra has said the West Asia crisis and the possibility of a weak monsoon pose significant risks to economic growth. He noted that despite global uncertainties, India has recorded growth of over 7 per cent in recent years. In the last financial year, the economy expanded by 7.7 per cent, supported by strong macroeconomic fundamentals.

He said the RBI has projected GDP growth of 6.6 per cent for the current financial year despite multiple challenges. He added that 'monetary and fiscal policies are robust, and because of that, we are witnessing high GDP growth.' On inflation, he said the central bank has revised its inflation forecast for FY27 to 5.1 per cent from the earlier estimate of 4.6 per cent.

He noted that inflation exceeding the RBI's medium-term target of 4 per cent in June was largely driven by supply-side factors. India's retail inflation rose to 4.38 per cent in June from 3.93 per cent in May, primarily due to higher food prices. Food inflation also increased to 5.32 per cent in June from 4.78 per cent in the previous month.

Highlighting another key risk, Malhotra said the progress of the monsoon remains crucial as a large section of the population depends on agriculture. He pointed out that the agriculture sector contributes around 17 per cent to India's Gross Domestic Product (GDP) and stressed the need to remain vigilant about the monsoon.

On the rupee, he said the domestic currency has remained relatively stable against its global peers despite a stronger US dollar and heightened geopolitical uncertainty. He said “After the war in West Asia, the dollar has strengthened, and the currencies of many countries have weakened. From a global perspective, the performance of the Indian rupee can be considered normal”. He also expressed confidence in India's external sector, and said “In the medium and long term, our balance of payments and external sector will remain strong. There is no need to worry.”

He reiterated that the RBI would continue to prioritise inflation control while supporting economic growth, adding that low and stable inflation provides the foundation for sustainable growth. Under the flexible inflation-targeting framework, maintaining price stability remains the central bank's primary objective, while supporting growth is its secondary mandate.

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