India on track for 8% growth after FY26, says RBI Deputy Governor Patra

Headline inflation likely to remain on track throughout 2025-26

India is likely to recover to its long-term growth trend of 8 per cent, said Michael Debabrata Patra, deputy governor, Reserve Bank of India (RBI).

Speaking at the New York Fed Central Banking Seminar, organised by the Federal Reserve Bank, on Monday, Patra said India’s GDP was projected to grow 7.2 per cent this financial year (FY25) and 7 per cent in FY26, with a strong likelihood of returning to the 8 per cent trend thereafter. His remarks were published on the RBI’s website on Tuesday.

“Our projections indicate India’s real GDP growth will be 7.2 per cent in FY25 and around 7 per cent in FY26 in a cyclical correction after the pandemic rebound. Thereafter, there is a strong likelihood that India’s growth will revert to its 8 per cent trend,” Patra explained.

The deputy governor stressed the importance of strengthening macroeconomic fundamentals and building financial buffers to mitigate global risks, highlighting the role of sound economic policies in this effort.

“We believe the best defence against global risks is to strengthen the macroeconomic fundamentals and build adequate buffers, supported by prudent macroeconomic policies.”

India’s foreign-exchange reserves hit a record high of $704.9 billion on September 27 before declining to $690.4 billion as of October 11. These reserves, which can cover 11.8 months of imports, exceed 101 per cent of the country’s external debt as of June 2024.

In 2024 (up to October 11), India’s reserves saw a net increase of $68 billion, making it the second-largest accumulator of foreign reserves among major economies, trailing only China.

On inflation, Patra said projections suggested price pressures would persist through October and November, with the headline rate expected to align with the RBI’s target by December and remain stable throughout FY26.

The RBI had projected inflation at 4.5 per cent for FY25, assuming a normal monsoon and stable supply chains. However, the retail inflation rate spiked to a nine-month high of 5.49 per cent in September, driven by rising food prices and because of a low base.