India at cusp of structural growth shift, says RBI gov Shaktikanta Das

India is at the cusp of a major structural shift in terms of economic growth and is moving towards 8 per cent gross domestic product (GDP) growth, Reserve Bank of India’s governor Shaktikanta Das said on Tuesday, while underpinning the importance of maintaining inflation at the targeted level for stability in the growth trajectory.

The Indian economy recorded a growth of 8.2 per cent in FY24 and averaged 8.3 per cent in the last three financial years. The Reserve Bank of India has projected 7.2 per cent GDP growth for the current financial year.

“India is at the threshold of a major structural shift in its growth trajectory, moving towards 8 per cent GDP growth in a sustained manner. We are moving towards an annual growth rate of 8 per cent,” Das said at the 188th Annual General Meeting of the Bombay Chamber of Commerce and Industry in the city.

 

“The Indian economy in the last financial year 2023-24 contributed to 18.5 per cent of global growth. That is eighteen and a half per cent of global growth driven by India's growth... It was much lower seven or eight years ago,” he said.

Regarding inflation, Das stated that maintaining a 4 per cent inflation rate would significantly strengthen the economy, financial system, and growth drivers. Das also said that one wrong move can lead to the loss of the battle against the inflation target of 4 per cent.

“High inflation makes the economy uncompetitive, makes the economy an unfavourable destination for both domestic and foreign investment, and above all, high inflation would mean lowering the purchasing power of the people, especially of the poor. When the country grows, naturally every section of society has to grow irrespective of whether they are rich or poor. Inflation, in that sense, if it is maintained at the targeted level, ensures the stability of the growth trajectory,” he said.

“We are still at 4.7 per cent in striking distance of 5 per cent. One serious weather event, vegetable prices may go up and we will be at 5 per cent. So, we have to navigate our path towards the 4 per cent inflation target with a clear and unambiguous focus and commitment to bring down the inflation to 4 per cent. There cannot be any wavering. There cannot be any distractions at this stage, because any distraction will severely compromise growth,” he added.

The governor further said that a country like India cannot depend on a single sector for growth.

“What India has been experiencing and what India needs in the future is growth that is driven by multiple sectors. India's growth story has been and will be a multi-sectoral growth, and our approach to growth in India has to be a multi-sectoral approach,” he said.

“A large country like this cannot depend on a single sector. Whether manufacturing or services or export-led growth or whatever, it has to be a multiple sector-driven growth story for India,” he added.

Das further said that the external sector remains very stable, with the current account deficit for the financial year 2023-24 at 0.7 per cent of GDP.

India’s current account registered a surplus in the final quarter of the previous financial year, primarily driven by higher services exports. For FY24, the current account deficit decreased significantly due to a lower merchandise trade deficit. The current account deficit fell to 0.7 per cent of GDP, or $23.2 billion, in FY24, down from 2 per cent of GDP, or $67 billion, in FY23.