Despite moderation in Q1, Indian growth story remains ‘intact’: Das

Reserve Bank of India (RBI) Governor Shaktikanta Das, during an Annual FIBAC 2024 Conference organised jointly by FICCI and IBA in Mumbai today, said to transition from an emerging to an advanced economy by 2047, the Indian economy needs a "multi-pronged and multi-sectoral approach".

Speaking on “India at an Inflection Point: Some Thoughts”, Das says despite the moderation in growth in Q1 FY25 to 6.7 per cent compared to the previous quarter, the fundamental growth drivers are gaining momentum. "The Indian growth story remains intact," says Das.

The Indian economy, which rebounded strongly from COVID-19, grew at an impressive annual average rate of 8.3% during the last three years. For the current financial year, the Reserve Bank has projected a growth rate of 7.2%.

Das says the Indian economy is forging ahead with "macroeconomic and financial stability", and a "favourable" growth-inflation balance. "The policy mix pursued in the recent years has strengthened the underlying fundamentals of the economy and augmented the buffers."

He says consumption and investment demand – the two main drivers of growth – are growing in tandem. "Government expenditure of the centre and the states is likely to pick up pace in line with the Budget Estimates in the remaining quarters of the year....overall, the Reserve Bank’s projection of GDP growth at 7.2 per cent for 2024-25 does not appear out of place."

The RBI Governor says consumption, the main driver of growth, has also picked up pace, with recovery in rural demand. "Investors’ confidence is at an all-time high; banks and corporates demonstrate robust balance sheets; and structural reforms are pushing forward our growth frontier."

He says in the medium to long term, the Indian economy will be on the cusp of "transformational" shifts as structural drivers are playing a bigger role in India’s macro outcomes. These drivers include policy push on creating robust physical infrastructure; fast-growing digital public infrastructure; innovation and technological advancements across sectors; and critical reforms.

On inflation, Das says India needs to remain "watchful" of how the forces impacting inflation play out. "The balance between inflation and growth is well-poised." India’s retail inflation declined to 3.5% in July, a near 5-year low.

Das says in this dynamic and uncertain world, India needs to remain vigilant and continue to build stronger buffers. "When I look at the entrepreneurial zeal and the talent of our younger population, it makes me more confident of India’s long-term growth prospects."

In his expectations from the financial sector, Das says the financial sector can contribute to India’s growth aspirations by improving female labour participation and by supporting MSMEs.