Reserve Bank of India Governor Sanjay Malhotra said the central bank is in “wait and watch mode” amid uncertainties from the West Asia war, with second-round effects being the real concern. In a speech at Princeton University on April 18, he stressed preventing supply shocks from embedding in price levels through inflation expectations rather than demand compression. He highlighted India’s significant exposure to the region.
Reserve Bank of India Governor Sanjay Malhotra delivered a speech at Princeton University in the US on April 18, stating that the central bank is in “wait and watch mode” due to uncertainties from the West Asia war. “Second-round effects are the real concern,” he said, warning that prolonged supply chain disruptions could embed the supply shock into the general price level. Monetary policy should focus on anchoring inflation expectations rather than blunt demand compression.
Earlier this month, the RBI’s Monetary Policy Committee kept the repo rate unchanged at 5.25%, forecasting retail inflation to more than double to 4.6% in 2026-27. Malhotra emphasized the need to be “agile and nimble,” avoiding “firm commitments” on the policy path and remaining data-dependent with a neutral stance.
The West Asia region accounts for about one-sixth of India’s exports, one-fifth of imports, half of crude oil imports, two-fifths of fertiliser imports, and almost two-fifths of inward remittances. In response, India is ramping up domestic oil and gas production, diversifying import sources, with no oil shortage due to reserves but some gas rationing for industry.
The rupee tumbled past 92-, 93-, 94-, and 95-per-dollar levels in March amid FPI selling of $13.6 billion in debt and equity, and $6.3 billion so far in April. March retail inflation rose marginally to 3.4%, while wholesale inflation surged to a 38-month high of 3.88% due to petroleum prices, though consumer fuel prices remain shielded.
