India well placed amid global AI risks, strong fundamentals offer resilience: RBI Governor

Digital Desk | New Delhi, Oct 3 (IANS) A correction in elevated artificial intelligence (AI)-related valuations in advanced economies could potentially benefit India by diverting capital flows towards domestic markets despite a slowdown in global investment cycle, Reserve Bank of India (RBI) Governor Sanjay Malhotra said on Saturday. Speaking at the Kautilya Economic Conclave 2026 here, Malhotra said the AI investment boom has been a major driver of global financial markets in recent years. However, he stated that any moderation in AI-related investment or earnings could lead to a significant repricing of financial assets linked to the sector. While such a correction may pose risks for global markets, it could have a favourable impact on India, the RBI Governor said. “If corrections in AI-related valuations were to happen in advanced countries, it may have a positive impact in terms of capital inflows,” says Malhotra. He further stated that Indian equity markets had already undergone a correction from elevated valuations in recent months but described the adjustment as orderly. The RBI Governor also identified AI-related valuation excesses as one of five key concerns facing the international financial system. The other risks include elevated global debt levels, leverage in the non-bank financial sector, growing private credit exposures and cybersecurity threats, according to him. Meanwhile, he stressed that these vulnerabilities do not indicate immediate financial stress. “It is not that I see any imminent signs of stress, but we need to remain alert to these risks,” he says. The country was navigating a challenging global environment from a position of strength, supported by sound macroeconomic fundamentals and resilient balance sheets across banks and non-bank financial institutions. While acknowledging that the country remains vulnerable to external shocks through commodity prices, global financial conditions and capital flows, he said the domestic financial system continues to demonstrate resilience. “Strong macroeconomic fundamentals and the resilience of the financial system provide confidence in our ability to withstand these lingering shocks,” he said. According to the RBI Governor, the most immediate concern is regarding cyber risk.