Governor Das Backs RBI's GDP Growth Forecast Despite June Quarter Slowdown

Even after a slowdown in GDP growth in the quarter ended June, the Reserve Bank of India remains optimistic about India’s growth prospects, Governor Shaktikanta Das said on Wednesday.

“Not withstanding the moderation in growth… the data shows that the Indian economy’s fundamental growth drivers are gaining momentum,” Das said at the #FIBAC 2024 ‘Banking for Viksit Bharat’ event.

For the first quarter this fiscal, India’s GDP growth came in at 6.7% against the RBI’s projection of 7.1%.

For the current financial year, the RBI had projected India’s GDP growth at 7.2%. Das said that the International Monetary Fund and World Bank have also upgraded their forecasts for India’s growth upwards to 7.00%.

“I think the projections made by all the international agencies as well as the reserve bank are converging,” Das said.

Das said that recent data has given confidence to say that the Indian growth story remains intact. He clarified this in regards to the discussions about whether the RBI’s 7.2% projection for growth would actually materialise or not.

He said that it is evident that India is on a sustainable growth path. “Consumption and investment demand, as I said—the two main drivers of growth—are growing in tandem,” Das said.

He said that expenditure by central and state governments is likely to pick up pace in line with the respective budget estimates. Also, strong balance sheets of banks and corporations have created congenial conditions to further support capital expenditure.

“Taking into account all these factors, I would therefore like to say that the Reserve Bank’s projection of GDP growth at 7.2% for the current financial year does not appear out of place,” Das said.

Das reiterated that the Indian economy is on the cusp of transformational shifts in terms of medium- to long-term growth prospects.

Further, the fact that growth is on the rising trend despite modest global growth shows that structural drivers are playing a bigger role in India’s macroeconomic outcomes.

According to Das, it is time for the private corporate sector to come forward in a big way, given the current favourable environment.

“There are signs of private sector investment happening in some sectors, as I listed out, but I think the scope can be more,” Das said.

He also said that the Indian economy would need a multi-pronged and multi-sectoral approach to realise the aspiration of transitioning from an emerging to an advanced economy by 2047.

On inflation, he said that the balance between inflation and growth is well-poised.

“With the monsoon progressing well and the healthy kharif sowing raising prospects of a better harvest, there is greater optimism that the food inflation outlook could become more favourable over the course of the year,” he said.

Talking about the priority sector lending program, Das said that it remains crucial in addressing credit gaps for underserved segments. He believes that there is still more to be done to improve the usage and quality of these services.

According to Das, the financial sector can contribute to India’s growth aspirations by improving female labour participation and supporting the MSME sector.

He said that lenders can tailor financial products and services that cater specifically to the needs of MSMEs and women entrepreneurs.