Trade Deals to Support Growth Despite Global Risks: RBI Governor
The Governor of the Reserve Bank of India, Sanjay Malhotra, conveyed that the trade agreements India has recently entered into are anticipated to bolster economic growth and export activities, especially amidst escalating global uncertainty and geopolitical tensions.
After the Monetary Policy Committee (MPC) meeting, Malhotra revealed that the committee has opted to maintain the repo rate at 5.25 percent and uphold a 'neutral' policy stance.
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Malhotra asserted that India's economy continues to stand firm amidst global challenges, being supported by consistent inflation rates and ongoing growth. He stated that despite increasing geopolitical tensions and heightened uncertainty, the Indian economy is currently prospering with robust growth and minimal inflation.
He further commented that anticipated growth in the upcoming quarters is expected to be robust, bolstered by recent advancements in trade. By securing a pivotal trade agreement with the European Union and nearing completion of negotiations with the US, the momentum of growth is anticipated to endure for an extended duration," states the Governor of the Reserve Bank of India.
He remarked that there is an anticipation of a moderate improvement in global economic growth in 2026 due to increased technology investments, favorable financial conditions, and government fiscal backing.
However, escalating geopolitical disputes and trade conflicts are introducing new uncertainties. He continued to mention that inflation continues to exceed expectations in numerous developed nations, resulting in variations in monetary policy decisions among them.
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Although bond markets remain wary as a result of fiscal uncertainties, equity markets, particularly in the technology sector, continue to demonstrate strong performance.
"The MPC noted that since the last policy meeting, external headwinds have intensified through the successful completion of trade deals augurs well for the economic outlook," he says.
According to the RBI Governor, there is anticipated improvement in urban consumption, aided by GST restructuring and looser monetary policies. He mentioned that increased capacity utilization, rapid growth in bank credit, positive financial circumstances, and sustained government expenditure on infrastructure projects are all factors that are expected to enhance investment activity.
Additionally, it is believed that the measures outlined in the Union Budget will also contribute to economic growth. Malhotra stated that the free trade agreement between India and the EU, as well as the potential trade deal between India and the US, among other trade agreements, are expected to bolster exports in the near future.
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Although there is an expectation for services exports to continue to show strength, Malhotra has highlighted potential risks due to geopolitical tensions, financial market instability, and evolving trade patterns.
However, the Monetary Policy Committee (MPC) has made a positive adjustment to India's growth forecast. The projections for real GDP growth in the first and second quarters of 2026-27 have been increased to 6.9 percent and 7.0 percent, respectively. He further expressed that despite uncertainty, global trade has shown notable resilience. India's merchandise exports saw a 1.9 percent year-on-year growth in the third quarter of 2025-26, with imports increasing at a quicker pace.
He mentioned that India's endeavors to establish bilateral and regional trade agreements will contribute to enhancing trade and investment, expanding export markets, and aligning the nation with global value chains. The RBI Governor affirmed, “Overall, India's external sector exhibits resilience, and we are confident in comfortably meeting our external financing needs”.