New Delhi, April 23: Global economic conditions and investor confidence have weakened due to ongoing conflicts in West Asia, impacting growth and inflation forecasts. Sanjay Malhotra, the Governor of the Reserve Bank of India (RBI), stated in the RBI bulletin on Thursday that the central bank will remain vigilant and implement policies prioritizing the best interests of the economy.
The ongoing conflict in West Asia has increased pressure on the global supply chain since March, although some relief was observed in the early part of April.
Before the conflict began, India’s economy was in a robust position, characterized by good growth rates and controlled inflation.
Malhotra mentioned in the RBI bulletin for the fiscal year 2027, “The escalation of conflict in March has created adverse conditions. However, India’s economy is stronger compared to previous crises and many other countries, making it capable of withstanding shocks.”
Globally, the threat to growth is rising as energy prices have surged, leading to increased inflationary pressures due to shortages of essential raw materials for various industries. This has also heightened risks in the oil market.
He noted that this uncertainty has driven investors towards safer options, resulting in a stronger US dollar and putting pressure on other currencies. Although there has been a slight decrease in metal and gold prices, financial markets have become more volatile.
Meanwhile, the stock market has also seen declines, and government bond yields have risen, already elevated due to inflation and financial concerns.
In India, economic activities remain strong in several sectors, although some sectors have experienced a slight slowdown.
He pointed out that the Consumer Price Index (CPI) inflation saw a minor increase in March, attributed to fuel and food prices. Following a temporary ceasefire in West Asia, there was some relief in the money market and bond yields.
Due to a reduction in imports and an increase in exports, the trade deficit has reached its lowest level in nine months. Foreign Portfolio Investment (FPI) has seen fluctuations, while Foreign Direct Investment (FDI) remained positive in February.
Malhotra warned that if the supply chain does not stabilize soon, the initial supply shock could later affect demand.
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