'Headroom... Improved Prospects For Indian Economy...' RBI Governor Sanjay Malhotra Ahead Of 2025

Amid the volatility in the economies around the world, resilience and cautious optimism define the outlook for 2025, according to Sanjay Malhotra, Governor of the Reserve Bank of India ( RBI ). In the foreword to the RBI's latest Financial Stability Report, Malhotra underlined the improving global economic prospects despite headwinds from geopolitical conflicts, policy uncertainty, and fragmented trade dynamics.  

“Financial conditions can be expected to remain easy and contribute to an improvement in the trajectory of global GDP from a prolonged phase of low growth. Robust labour market and sound financial system too provide congenial conditions for this turnaround,” RBI Governor noted. 

Governor pointed to the potential for continued declines in inflation, recovery in purchasing power, and easing financial conditions, which are expected to improve global GDP growth after a period of stagnation. 

“The resilience of financial systems can be tested if risks like intensifying geopolitical conflicts, financial market turmoil, and extreme climate events materialise,” Malhotra cautioned. 

Nonetheless, RBI Governor affirmed that financial regulators worldwide are maintaining vigilance, drawing lessons from past crises to strengthen institutions and address vulnerabilities.

Promising Outlook For India

For India, the outlook is particularly promising. Stress tests reveal that the country’s banking and non-banking financial sectors are well-capitalised and resilient, even under adverse scenarios. “Our financial system is bolstered by robust earnings, low levels of impaired assets, and strong capital buffers,” Malhotra noted.  

As economic activity slows in early 2024-25, consumer and business confidence remains high, with corporations stepping into 2025 on strong financial footing. Malhotra stressed the RBI's focus on maintaining systemic stability and fostering a financial system that is “customer-centric, technologically leveraged, and financially inclusive.”  

“As we strive to preserve financial stability to support a higher growth path for the Indian economy, our focus remains steadfast on maintaining stability of financial institutions and, more broadly, systemic stability. We continue to secure and anchor public trust and confidence to support India’s aspirational goals,” the RBI Governor concluded.