 "Shaktikanta Das, Shaktikanta, RBI Governor")
Mumbai: Reserve Bank of India (RBI) Governor Shaktikanta Das arrives for a press conference, in Mumbai, Friday, June 7, 2024.
Governor of the Reserve Bank of India Shaktikanta Das stated on Tuesday that India is poised for a significant structural change in its economic growth trajectory, with an 8 per cent GDP growth rate. She also emphasised the significance of keeping inflation within the targeted range to ensure stability in the growth trajectory.
The Indian economy grew by 8.2 percent in FY24 and 8.3 percent on average over the previous three fiscal years. 7.2% GDP growth is anticipated by the Reserve Bank of India for the current fiscal year.
“India is poised to make a significant structural change in its growth trajectory, aiming for consistent GDP growth of 8%. At the city’s 188th Annual General Meeting of the Bombay Chamber of Commerce and Industry, Das stated, “We are moving towards an annual growth rate of 8%.”
In the most recent fiscal year, 2023–2024, the Indian economy accounted for 18.5% of world growth. That translates to 18.5 percent of global growth being fueled by India’s growth. Seven or eight years ago, it was far lower,” he stated.
In terms of inflation, Das said that keeping the rate around 4% would greatly improve the financial system, the economy, and the factors that spur growth. Das added that one miscalculation may mean losing the war against the 4% inflation target.
“High inflation reduces the purchasing power of the populace, particularly the poor, and makes the economy unattractive to both domestic and international investment. High inflation also makes the economy less competitive. Whether they are wealthy or not, every segment of society must inevitably expand as the nation does. In that way, inflation guarantees the stability of the growth trajectory provided it stays at the intended level, the speaker stated.
“At 4.7%, we are still within striking distance of 5%. In the event of a significant weather event, vegetable costs can rise, bringing us to 5%. Therefore, we must chart a clear and unambiguous course towards the 4% inflation target while remaining committed to bringing down inflation to that level. There can be no hesitancy. Distractions are not allowed at this point since they will seriously hinder progress, the speaker continued.
The governor went on to say that an economy the size of India cannot rely on any one industry for expansion.
Growth powered by several sectors is what India needs going forward and what it has been going through. Multi-sectoral growth has been and will continue to be India’s economic story, hence a multi-sectoral approach to growth in India is required, the speaker stated.
This kind of big nation cannot rely on just one industry. India’s growth story needs to be driven by a variety of sectors, he continued, whether it be manufacturing, services, export-led growth, or something else entirely.
Das continued by saying that the current account deficit for the fiscal year 2023–2024 is expected to be 0.7% of GDP, indicating that the external sector is still highly stable.
India’s current account reported a surplus in the last quarter of the previous financial year, mostly driven by stronger services exports. A smaller merchandise trade deficit for FY24 resulted in a significant decrease in the current account deficit. From 2% of GDP, or $67 billion, in FY23 to 0.7% of GDP, or $23.2 billion, in FY24, the current account deficit decreased.