New Delhi, April 21 (NationPress) The Reserve Bank of India (RBI) is vigilantly observing the repercussions of the West Asia conflict. Governor Sanjay Malhotra indicated that the bank will refrain from making definitive commitments regarding future interest rate trajectories, cautioning that extended supply interruptions could further embed inflation into India's overall price levels.

During his address at Princeton University in the United States, Malhotra emphasized that the ongoing turmoil represents a direct threat to the Indian economy, given the region's significant impact on the country's trade.

Notably, West Asia constitutes approximately one-sixth of India's exports, one-fifth of its imports, and half of its crude oil imports, along with two-fifths of its fertilizer imports and inward remittances, as highlighted by him.

"The real concern lies in second-round effects," he remarked, warning that an initial supply shock could become integrated into the general price level if disruptions continue.

He indicated that the central bank is not in a rush to adjust rates, stating, "We are in a wait-and-watch mode."

The monetary policy committee will remain data-driven and will continuously evaluate the risk balance. The MPC has upheld a neutral position since June 2025, following cumulative rate reductions of 125 basis points since February of that year.

Malhotra defended the RBI's actions in the foreign exchange markets, while emphasizing that the bank has not committed to an "indefensible peg" regarding the Indian rupee, which fell by over four percent since the conflict began in March.

Additionally, India's foreign exchange reserves are currently at $710 billion, sufficient to cover over 11 months of imports.

Malhotra also underscored the RBI's developmental initiatives, mentioning advancements in the Unified Lending Interface and the pilot for the central bank's digital currency.

Regarding digital infrastructure and economic growth, he noted that the Unified Payments Interface (UPI) achieved over 22 billion transactions in March alone, with the central bank now working on the Unified Lending Interface (ULI) to facilitate instant credit access for small farmers and entrepreneurs.

Furthermore, he stated that the government's fiscal deficit-to-GDP ratio has decreased from 9.2 percent in 2020-21 to 4.4 percent in 2025-26.

He remarked that India's general government debt-to-GDP ratio of 81.1 percent in 2024–25 is reasonable, noting that most of the world's leading economies by nominal GDP, except for Germany and Russia, have higher debt ratios than India.