RBI governor’s blunt message on inflation: ‘growth is our secondary objective’

The Reserve Bank of India is not treating the current bout of elevated inflation as a trigger for tighter policy, Governor Sanjay Malhotra indicated in an interview with Doordarshan News, describing price pressures as “contained” despite being “currently a bit elevated.”

Malhotra attributed the uptick in prices primarily to supply-side factors, saying “this rise is primarily due to supply-side factors” rather than demand outstripping supply across the economy. Consumer price inflation is projected at about 5.1% this year, which he called “slightly above our target,” while noting the increase is concentrated in specific sectors tied to supply shocks.

Explaining the RBI’s approach to its dual mandate, the governor said, “our primary objective is price stability, growth is our secondary objective…these two objectives are not contradictory. They support each other.” The remark suggests the central bank does not see the need to sacrifice growth momentum in order to bring inflation down from its current level.

On the state of the broader economy, Malhotra said growth remains resilient despite global turbulence, supported by domestic demand and investment. He also addressed credit conditions, noting that overall credit growth is close to 18%, with MSME lending and gold loans expanding at 24-25%.

Comparing the current credit expansion to the microfinance sector’s difficulties roughly two years ago, Malhotra said the RBI does “not see immediate distress” in today’s lending growth, though the central bank continues to monitor fast-growing segments closely to guard against future slippages.

The governor added that the RBI’s reading of inflation goes beyond the headline number: “When we talk about headline inflation…we also look closely at its composition.” That granular approach, he indicated, will shape how the central bank responds to price trends and credit growth in the months ahead.

Wikimedia Commons/by Nichalp