Cloud of external factors may rain on growth: RBI

However, India's banking system is robust and inflation remains benign

- Shayan Ghosh

Reserve Bank of India governor Sanjay Malhotra has cautioned that spillovers from external challenges and weather-related events could impact India's growth, even as domestic drivers and fundamentals remain intact.

"There are many structural shifts that are reshaping the global economy, including growing fragmentation in trade, rapid technological disruption, ongoing climate change and protracted geopolitical hostilities," the RBI governor said in the foreword to the central bank's half-yearly Financial Stability Report.

While there are downside risks to the growth outlook, inflation is benign, according to Malhotra "...there is greater confidence in the durable alignment of inflation with the Reserve Bank's target," he said, referring to RBI's medium-term target for the consumer price index (CPI) inflation of 4%, within a band of +/- 2%.

Retail inflation cooled to its lowest level in over six years in May, aided by a moderation in food prices. Inflation measured by CPI stood at 2.82% year-on-year against 3.16% in April.

Mint reported on 12 June that this softening was the fourth consecutive month of sub-4% reading, the longest such streak in at least five years.

Malhotra's concerns stem from US President Donald Trump's tariff tantrums, which are threatening to upend established supply chains.