18% credit growth, 5.1% inflation: why RBI governor isn’t worried yet

Reserve Bank of India Governor Sanjay Malhotra has offered a reassuring read on two numbers that often worry economy watchers — inflation and credit growth — telling Doordarshan News that neither currently calls for a policy course correction.

On prices, Malhotra said inflation is “currently a bit elevated” but remains largely contained, with the rise “primarily due to supply-side factors” rather than demand pressures. Consumer price inflation is projected at about 5.1% this year, which he termed “slightly above our target,” attributing the gap to specific sectors affected by supply shocks.

On credit, the governor said overall growth is close to 18%, with MSME lending and gold loans expanding even faster, at 24-25%. Comparing this to the microfinance sector’s difficulties around two years ago, he said the RBI does “not see immediate distress” in the present expansion, while continuing to monitor fast-growing loan segments to catch any future slippage early.

Malhotra also addressed how the RBI balances its dual mandate, saying price stability is the primary objective and growth the secondary one, but stressing the two are not at odds: “these two objectives are not contradictory. They support each other.”

He pointed to underlying economic resilience, noting growth remains steady despite global turbulence, helped along by domestic demand and investment activity. On measuring inflation, he said the RBI looks beyond the headline figure to its composition, indicating that policy responses will track the specific drivers of price changes rather than reacting to the topline number alone.

Taken together, the governor’s remarks point to a central bank comfortable letting current credit growth and price trends play out for now, while keeping close watch on the segments and sectors driving both.

Wikimedia Commons/by Nichalp