During a speech at Princeton University, Reserve Bank of India (RBI) Governor Sanjay Malhotra discussed the critical need to manage the second-round effects of supply shocks on inflation. He highlighted that prolonged supply disruptions could lead to rising inflation expectations, which monetary policy must prevent. Malhotra noted that the RBI's intervention in the foreign exchange market was necessary, especially as the Indian rupee depreciated over 4% following the West Asia conflict. He reassured that India's forex reserves, amounting to $710 billion, are sufficient to cover over 11 months of imports. The conflict in West Asia, which impacts a significant portion of India's trade, is a pressing concern, as it accounts for about one-sixth of exports and half of crude oil imports. Malhotra emphasized that the Monetary Policy Committee (MPC) has adopted a neutral stance, maintaining flexibility to respond to evolving inflation and growth dynamics. He also pointed out the positive trend in fiscal policies, with the fiscal deficit-to-GDP ratio decreasing from 9.2% in 2020-21 to 4.4% in 2025-26. The RBI's focus remains on long-term financial stability while also pursuing innovative initiatives like the Unified Lending Interface and central bank digital currency (CBDC) to enhance financial inclusion and efficiency.