RBI Governor Sanjay Malhotra Says 'PM Modi's Reforms Will Offset Tariff Impact'

RBI Governor Sanjay Malhotra on Wednesday, October 1, said the US tariffs induced developments are likely to "decelerate growth" in the second half of the current fiscal year, however, PM Modi led next-gen GST reforms among other policy support measures will aid in offsetting impact of foreign factors on trade-linked growth.

Malhotra also announced that India's apex bank has revised upwards its GDP forecast for FY26 to 6.8%, from 6.5% earlier.

On the GDP revision, Aditi Singh, Chief Strategy Officer, Satin Creditcare, said, “The upward revision of *GDP growth to 6.8% reinforces India’s resilient domestic demand, which provides a supportive backdrop for credit-driven businesses.”

Speaking about India's economic outlook during the fourth bi-monthly policy review of FY26, RBI Governor Sanjay Malhotra said, “Economic growth outlook remains resilient helped by favourable monsoon, lower inflation and monetary easing. Domestic economic activities continue to sustain momentum in 2nd quarter of this fiscal."

“The implementation of several growth-inducing structural reforms, including streamlining of GST are expected to offset some of the adverse effects of the external headwinds," he said.

Meanwhile, he also proposed key additional measures likely to have a major impact in improving flow of credit, simplifying foreign exchange management, internationalization of the Indian Rupee, and promoting ease of doing business

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On forex reserves, the RBI governor said India’s forex reserves at $700.2 billion are enough to cover 11 months of imports.

He also added that strong remittance is expected to keep current account deficit sustainable in current fiscal. On inflation, the RBI governor said, “The Indian economy remains poised to register high growth. Sobering inflation supports monetary policy to support growth."  

The central bank now projects inflation at 2.6% for FY26, lower than the earlier estimate of 3.1%.

“Looking ahead, an above normal monsoon, good progress of kharif sowing and adequate reservoir levels have further brightened prospects of agriculture and rural demand," the RBI MPC Chairperson said.

"Buoyancy in services sector coupled with steady employment conditions are supportive of demand, which is expected to get a further boost from the rationalisation of GST. Rising capacity utilisation, conducive financial conditions, and improving domestic demand should continue to facilitate fixed investment," he said.