Informist, Tuesday, Jun 25, 2024

--RBI's responsibilities are much wider than most other central banks

--India moving towards an annual growth rate of 8%

--India at the threshold of major structural shift in growth story

--India contributed 18.5% to global growth FY24

--Growth driven by structural reforms such as the GST regime

--IBC, flexible inflation-targetting key structural reforms

--Stable inflation at the core of long-term, sustainable growth

--Confident of a 7.2% GDP growth forecast for FY25

--Confident of FY25 GDP growth view as growth momentum strong

--Analysis shows growth momentum may be more Apr-Jun vs Jan-Mar

--Rural consumption has picked up, mfg sales volume up

--Saw a lull in the monsoon in last two weeks

--Services, manufacturing sectors doing extremely well

--Global demand picking up, intl agencies see high global trade

--Pvt sector capex is now picking up, clear evidence of that

--India needs growth driven by multiple sectors

--Domestic manufacturing has been our mainstay

--Country like India cannot depend on a single sector

--Still a lot of work to be done in terms of the agri sector

--Agri sector in recent years has become more climate-resilient

--RBI has enabled the country's financial sector

--Helped the financial sector navigate through multiple crises

--Econ has emerged much stronger after the crises of last 4 years

--Financial sector emerged much stronger after the crises of last 4 yrs

--Price, financial, external stability are key to sustained growth

--Stability of payments systems is key to sustained growth

--Growth well-sustained, optimistic on outlook for FY25

--Momentum of growth not slowing down month on month

--Health of banks, NBFCs good after a long time

--Can meet external sector obligations with high FX reserves

--Central bank digital currency is the future of money

--Remain committed to supporting India's growth story

MUMBAI – India is moving towards an annual GDP growth rate of 8% on a sustained basis as the momentum of growth remains strong, Reserve Bank of India Governor Shaktikanta Das said today.

"India is at the threshold of a major structural shift in its growth trajectory, moving towards 8% annual GDP growth on a sustained basis. If you look at the average growth that India recorded over the last three years, the average comes to 8.3%," Das said at the 188th annual general meeting of Bombay Chamber of Commerce and Industry here. India's GDP grew 8.2% in 2023-24 (Apr-Mar).

After weighing in the upside and downside risks, the RBI is pretty confident about India achieving 7.2% GDP growth in the current financial year on the back of strong economic momentum, Das said. He sees no reason why the growth momentum should slow down and said that the central bank's analysis shows that the momentum must be even higher. According to the RBI's staff paper released last week, India's GDP growth may touch 7.6% in the current financial year, and then moderate to 6.4% in 2025-26.

During Jan-Mar, India's GDP grew 7.8% against 5.9% implied by the National Statistical Office's second advance estimate. While the central bank in its monetary policy outcome raised the growth projection for Apr-Jun to 7.3% from 7.1% estimated earlier, Das said that recent forecasts suggest that growth in the current quarter could be much higher. According to the staff paper, high-frequency indicators show that GDP growth in Apr-Jun is "broadly maintaining the pace it achieved in the preceding quarter".

He said that India contributed 18.5% to global growth in the financial year ended Mar 31. According to him, the main drivers of this growth in the last three years have been various structural reforms and policy initiatives such as goods and services tax. He said that GST has stabilised in India much faster than in other countries. Other measures such as the Insolvency and Bankruptcy Code, 2016 and the flexible inflation targeting framework which was put in place in 2016 have also helped.

Das reiterated that rural consumption, which was lagging behind for a long time, has picked up. He said that sales volume of manufacturing companies have risen and that the monsoon forecast looks good despite a lull recently. Favourable external demand and clear evidence of a pickup in private sector capital expenditure is also another sign.

He said that India's growth story needs to be driven by sustained multiple sectors as a large economy such as India cannot depend on a single sector. While the agriculture sector in recent years has become more climate-resilient, a lot of ground has to be covered in the sector, such as improvement of the supply chain framework.

Overall, he said that the RBI has enabled the financial sector to navigate the multiple crises in the past four years starting from COVID-19. What is unique about India is that the country and the economy have come out much stronger than it was before COVID-19.

He said that stability is crucial for any country's sustained growth and laid out some key points including stability of price, the financial sector, the external sector and the payments system. He said that ensuring price stability and meeting the inflation target is extremely essential for sustained growth.

He also touched upon the health of banks and non-banking financial companies, which have been the best in a long time. While the external sector also looks stable, Das said that with such high foreign exchange reserves, India will be able to meet its external sector obligations. He concluded by saying the central bank remains committed in supporting India's growth story. End

Reported by Subhana Shaikh

Edited by Maheswaran Parameswaran

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