Supply Chain Disruptions Remain A Key Concern: RBI Governor Amid West Asia Turmoil

Last Updated:June 05, 2026, 11:02 IST

Commenting on the domestic economy, the RBI Governor said India is better placed to deal with the current phase of global uncertainty.

Reserve Bank of India (RBI) Governor Sanjay Malhotra on Friday said the global economic outlook continues to remain uncertain amid the ongoing geopolitical situation in West Asia, with rising energy prices and disruptions to supply chains weighing on economic activity.

“The global economic outlook remains clouded by the continuing geopolitical impasse in West Asia as sharply escalating energy prices and global supply chain disruptions continue to hinder economic activity. Major advanced economy central banks are likely to pivot towards monetary policy tightening. While equity markets remain buoyant, driven by AI-fuelled optimism, global bond markets remain bearish amidst renewed inflation fears and continuing debt sustainability concerns," Malhotra said, while announcing the Monetary Policy Committee’s decision.

He further said, “Risk of sentiments and safe haven demand are imparting volatility to forex markets with a depreciating trend in many EME currencies."

‘India Entered Global Turbulence With Stronger Economic Fundamentals’

Commenting on the domestic economy, the RBI Governor said India is better placed to deal with the current phase of global uncertainty.

“Over the past few months, the global economy has been shaped by heightened uncertainty, disruptions to key trade routes and supply chains, increased market volatility and cautious business sentiment. Let me, at the very outset, emphasise that the Indian economy entered this episode of global turbulence with much better fundamentals than in previous similar episodes. We remain confident to withstand these shocks with minimum pain," he said.

On inflation, Malhotra said consumer price inflation remains under control despite global developments, though risks remain.

“CPI inflation remains below the target despite global shock as the pass-through to domestic prices has been limited. While the baseline projections point towards headline inflation forming up towards the upper tolerance level in Q3 this year. The impact of the supply shock is expected to wane Q4 onwards. The underlying inflation pressures continue to remain benign at this juncture," he said.

The Governor added, “However, generalisation of inflation through second round effects on expectations and wages is a distinct possibility, warranting a close vigil. The outlook also remains clouded due to the sub-normal southwest monsoon forecast and El Nino risks."

The Monetary Policy Committee (MPC) decided to keep the policy repo rate unchanged at 5.25% and maintain a neutral policy stance.

West Asia Crisis

The RBI Governor’s remarks come against the backdrop of the continuing geopolitical impasse in West Asia in the wake of the US-Iran war, which he said has contributed to higher energy prices, disruptions to key trade routes (like the Strait of Hormuz) and supply chains, increased market volatility and cautious business sentiment globally.

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