Reserve Bank of India (RBI) Governor Sanjay Malhotra anticipates a prolonged period of low policy rates for India, contingent on stable inflation and the absence of significant economic disruptions. This outlook reflects optimism regarding India's economic trajectory, characterized by a favorable combination of subdued inflation and robust growth.

In a recent interview with the Financial Times, Malhotra highlighted that the rate cuts implemented since he assumed office a year ago have fostered a "Goldilocks" phase, marked by brisk economic expansion and low inflation. The RBI's projections suggest that borrowing costs are likely to remain accommodative for an extended period. Since Malhotra's appointment, the RBI's Monetary Policy Committee has reduced the repo rate by a cumulative 125 basis points to 5.25%.

India's headline consumer inflation stood at 0.7% in November, significantly below the lower bound of the RBI's target range. However, it is forecast to rise to 2.9% in the January–March quarter. The RBI expects GDP growth to moderate to 6.7% in the three months starting next April, from 8.2% in the July-September quarter.

Malhotra noted that the RBI's forecasts do not currently account for potential upside from trade agreements under negotiation with the United States and the European Union, which could potentially boost growth by as much as half a percentage point. He also defended the reliability of India's economic data and affirmed that the central bank's approach to the rupee remains focused on curbing excessive volatility rather than targeting a specific exchange rate.

The RBI Governor's statement signals a continuation of the central bank's accommodative monetary policy stance, aimed at supporting economic growth while maintaining price stability. This approach is predicated on the expectation that inflation will remain within a manageable range and that the Indian economy will continue its strong growth trajectory.