India’s Economic Growth Outlook

By Siddhi Nayak and Swati Bhat
MUMBAI (Reuters) – Despite a moderation in India’s first quarter GDP growth, the Reserve Bank of India (RBI) Governor Shaktikanta Das expressed confidence that the South Asian economy will achieve a full year growth of 7.2%.

India’s economic growth slowed to 6.7% year-on-year in the April-June quarter, below the estimated 6.9% and the RBI’s projection of 7.1%. This slowdown was attributed to decreased government spending during national elections.

In a speech at the annual FIBAC banking conference, Das remarked, “Fundamental growth drivers of the Indian economy are not slowing; they are gaining momentum. This gives us confidence that the Indian growth story remains intact.”

He noted that agriculture is expected to perform better due to favorable monsoon conditions, boosting rural demand, alongside a recovery in government capital expenditure.

Das emphasized that India is on a sustainable growth path, with consumption and investment demand growing in tandem. The RBI’s projection of 7.2% GDP growth for 2024-25 remains plausible.

He highlighted the balance between inflation and growth, stressing the importance of maintaining price stability to support medium to long-term growth. Although disinflation has faced interruptions from food inflation, Das remains optimistic that better monsoon progress can improve the food inflation outlook.

“We must navigate the last mile of disinflation successfully to maintain the credibility of our flexible inflation targeting framework,” Das concluded.