 "Indian economy likely to grow close to 8% in FY24, says RBI Governor")
The Indian economy is likely to grow more than the National Statistical Office (NSO) estimate of 7.6 per cent in the current financial year (FY24) and it could be close to 8 per cent, Reserve Bank of India (RBI) Governor Shaktikanta Das said on Wednesday.
The NSO in its second estimate pegged economic growth at 7.6 per cent for FY24.
“Our sense and understanding of the high-frequency indicators and the momentum of economic activity tells us that this 5.9 per cent growth in Q4 could be exceeded and when that happens the growth will be more than 7.6 per cent. There is quite a good chance of the gross domestic product (GDP) number for the current year being very close to 8 per cent,” Das said in an interview with news channel ET Now.
On the issue of Paytm Payments Bank that has been asked to stop deposit and credit transactions after March 15, Das said the regulatory action was against the payment bank, a regulated entity, and not against any fintech.
He said the March 15 deadline would be sufficient and not cause any disruption since only 15-20 per cent of Paytm app users have linked their account to the payments bank.
“So far as Paytm is concerned, a large part of its payments app users, almost to the extent of about 80 to 85 per cent, are linked to other banks along with Paytm bank or to entirely different banks. So, therefore, about 80 to 85 per cent of the customers who are using the app will not be impacted at all because their app is also linked to another bank account of theirs,” Das said.
“So, their payments can go on in a non-disruptive manner. The challenge is with regard to those 15 or 20 per cent of the users who have linked only with Paytm Payments Bank. Therefore, Paytm Payments Bank has been advised to shift these customers to other banks,” Das said, stressing that the RBI favours innovation in the financial technology sector and has even introduced Sandbox for testing new tools.
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“The RBI is and remains fully supportive of fintech...The RBI is all for fintech to grow.”
Regarding GDP growth for FY25, Das stuck to the estimates provided during the February monetary policy review which was 7 per cent.
“We are quite optimistic about next year. And I say, with a reasonable amount of confidence based on our internal analysis and research, that 7 per cent next year is definitely very much on the table,” Das said.
While adding that the economic growth momentum has been strong, Das said rural demand has improved compared to the year-ago period and urban demand continues to be very strong. Also, the investment activity remains strong on the back of government capex, and private capex is also beginning to pick up. There are signs of private capex revival, particularly in certain sectors like steel, construction activity, textiles, and chemicals, according to Das.
The governor said the savings rate in the country would improve as economic growth strengthens.
Currently, the credit growth in the economy is about 16 to 17 per cent and deposit growth is around 12 to 13 per cent. Meanwhile, the historical growth trends in deposits are around 13 to 14 per cent.
“To some extent, I think there has been some dip in deposits, perhaps because I think now there is a propensity to spend more. I think people’s consumption expenditure is picking up. But, eventually, that money comes back into somebody else's bank account. So, as economic growth takes a greater foothold, I think one can expect the savings rate to improve.”
Speaking about inflation and maintaining the stance, the governor said the RBI was trying to bring inflation sustainably and durably to 4 per cent.
“It cannot be just a one-off number or just a one-month number touching 4 per cent, which will give us satisfaction. It has to be sort of sustainably and durably at around 4 per cent and that is something which will give us greater confidence. But the direction is very clear, inflation is on a downward trajectory.”
However, the central bank continues to be cautious with its monetary policy stance due to two major uncertainties emanating from geopolitical risks resulting in supply chain challenges and weather-related events that affect food prices.
The inflation print for January was 5.1 per cent, 110 basis points higher than RBI’s target. The RBI’s estimation of Consumer Price Index inflation for FY25 is 4.5 per cent.