RBI Stands Guard: Volatility Control & Fiscal Moves Strengthen India’s Position

RBI Governor Sanjay Malhotra emphasizes vigilance against rupee volatility and supports tax relief for foreign investors in government securities, anticipating stronger external positioning. The RBI stays focused on a 4% inflation target amid rising price pressures and investigates introducing polymer currency notes amidst global uncertainties.

The Reserve Bank of India (RBI), under Governor Sanjay Malhotra, reaffirmed its commitment to maintaining economic stability by addressing excessive currency volatility. Speaking at the post-Monetary Policy Committee press conference, Malhotra expressed readiness to intervene in the currency market when necessary to curb speculative and disorderly movements.

Malhotra lauded the government’s recent decision to exempt foreign investors from capital gains tax on government securities, predicting that this would bolster India's external financial position. This move, he described, as 'positive', is anticipated to strengthen the balance of payments substantially.

Amid volatile global economic conditions and an increase in inflation projections due to heightened crude oil prices and uncertainties in West Asia, the RBI remains firmly committed to its 4% inflation target. Malhotra highlighted the central bank's vigilance on whether current inflationary shocks might culminate into broader expectations.

Identifying prolonged supply chain disruptions from the West Asia tensions as the primary risk, Malhotra dismissed concerns about the RBI selling gold, indicating instead a slight increase in gold reserves. Meanwhile, the central bank is preliminarily assessing the feasibility of introducing polymer currency notes.