RBI Governor Sanjay Malhotra has indicated that the central bank may look through the current bout of inflation and spurt in credit growth, according to a report by Business Today. In an interview with Doordarshan News, Malhotra struck a notably composed tone, describing price pressures as contained even if "currently a bit elevated", and attributed the uptick largely to supply-side disturbances. This suggests the RBI is willing to tolerate temporary spikes rather than choke off growth.
Inflation: A Supply-Side Story
Malhotra said, "Inflation is also under control although it is currently a bit elevated...this rise is primarily due to supply-side factors." The central bank's approach to inflation is increasingly granular. "When we talk about headline inflation...we also look closely at its composition," he said, noting that the consumer price index (CPI) is projected at about 5.1% this year, which is "slightly above our target" but driven by specific sectors and supply shocks. Policy, he implied, will respond to these underlying drivers rather than the headline number alone.
Credit Growth: Brisk but No Immediate Distress
Credit is expanding briskly—close to 18% overall—with pockets such as micro, small and medium enterprises (MSMEs) and gold loans growing at 24-25%, according to Malhotra. Yet, unlike the excesses seen in microfinance two years ago, "we do not see immediate distress," he noted, even as the RBI keeps a close watch on fast-growing segments to guard against future slippages. The following table summarizes the credit growth rates:
| Segment | Growth Rate |
|---|---|
| Overall credit | ~18% |
| MSMEs and gold loans | 24-25% |
Policy Stance: Balancing Inflation and Growth
Malhotra reiterated the RBI's dual mandate: "Our primary objective is price stability, growth is our secondary objective...these two objectives are not contradictory. They support each other." This stance indicates that the RBI is willing to look through temporary price worries to support economic expansion. Growth remains resilient despite global turbulence, underpinned by domestic demand and investment, he said.
For investors and executives, the governor's comments signal that near-term interest rate moves are unlikely unless inflation becomes more broad-based. The focus on supply-side factors and granular inflation composition provides room for the RBI to maintain an accommodative posture even as credit growth surges. The absence of distress in fast-growing segments like MSMEs and gold loans further reduces the urgency for macroprudential tightening. However, the RBI's close monitoring of these segments will be key to preventing a buildup of risks.
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