New Delhi, Dec 17 (NationPress) Governor of the Reserve Bank of India (RBI), Sanjay Malhotra, has indicated that key policy rates are likely to remain low for an extended duration, based on the RBI's forecasts. This comes as the Indian economy demonstrates significant growth while keeping inflation in check, as reported by the Financial Times.

Malhotra also mentioned that the nation's economic expansion might exceed the RBI's current estimates if the ongoing trade negotiations with the EU and the US culminate in agreements.

He noted, “The potential benefits from the US trade agreement could add around half a percentage point to growth,” as per the FT report.

While the central bank has not thoroughly analyzed the potential impact of the EU trade deal, Malhotra suggested that it too would contribute positively to growth.

In response to concerns from certain economists regarding the accuracy of India's economic data, he acknowledged that while some data revisions occur, “I believe the figures are robust.”

Earlier on December 5, Malhotra announced a 25 basis points reduction in the repo rate, lowering it from 5.5% to 5.25%, aimed at stimulating economic growth.

He pointed out that the remarkable economic growth of 8.2% in the second quarter and the significant drop in inflation to 1.7% have created a unique “Goldilocks period” for the Indian economy.

Malhotra further noted that the favorable inflation environment has provided the necessary space for a repo rate cut to foster growth. The RBI has also revised its GDP growth projection upwards to 7.3% from the previous 6.8%.

Moreover, he stated that the RBI plans to enhance liquidity in the economy by executing open market operations, purchasing government securities worth Rs 1 lakh crore. Additionally, a dollar-rupee swap arrangement of $5 billion will be established.

Malhotra reiterated that the RBI will maintain a “neutral policy stance.”

This neutral approach aims to neither excessively stimulate nor restrict liquidity, striking a balance between managing inflation and supporting growth. The RBI has adhered to this stance as it assesses the effects of previous monetary policy easing and unfolding trade implications.