Mumbai/IBNS: Reserve Bank of India (RBI) Governor Shaktikanta Das said India has the potential to achieve sustainable economic growth of up to 8 percent in the medium term.
The RBI chiefs remarks follow recent data showing that Indias gross domestic product (GDP) slowed to 6.7 percent in the second quarter, down from 8.2 percent during the same period last year.
This deceleration has intensified calls for the central bank to consider initiating a rate-cutting cycle sooner.
In an exclusive interview with CNBCs Tanvir Gill on Friday, RBI chief Shaktikanta Das expressed his optimism about Indias growth prospects.
Das projected a growth rate of 7.5 percent for the next few years, with potential for even higher growth.
Das acknowledged the challenge in defining what constitutes healthy growth for the worlds most populous nation but suggested that a range of 7.5 percent to 8 percent could be sustainable over the medium term.
In an August bulletin, the RBI forecasted a real GDP growth rate of 7.2 percent (adjusted for inflation) for both 2024-2025 and the first quarter of the 2025-2026 fiscal year, with risks evenly balanced on either side.
India has previously been recognized by the International Monetary Fund (IMF) as the worlds fastest-growing major economy.
Goldman Sachs predicts that India could become the worlds second-largest economy by 2075, surpassing Japan, Germany, and the United States, and trailing only China.
Despite these projections, Indias growth rate has moderated in recent quarters. The IMF has warned that economic expansion may slow to 6.5 percent by 2025.
This comes at a time when several major central banks, including the European Central Bank, the Bank of England, and the Swiss National Bank, have started to ease monetary policy.
The US Federal Reserve is also anticipated to join the trend of rate cuts, which could further pressure India to adjust its own monetary policy.
Das noted the global trend of rate cuts, saying, This seems to be the rate-cut season.
However, he emphasized that RBIs monetary policy decisions will be primarily driven by domestic macroeconomic conditions, including inflation and growth dynamics.
While global developments and actions by other central banks are considered, the RBIs decisions are ultimately based on domestic factors.
Regarding the Feds upcoming interest rate decision, Das stated that Indias policy will not be influenced by the extent of any Fed rate cuts, whether 25 or 50 basis points.
He also indicated that the RBIs Monetary Policy Committee (MPC) has not yet decided on a rate cut for early October.
We will discuss and decide in the MPC, but as far as growth and inflation dynamics are concerned, I would like to emphasize that Indias growth story remains robust. We will evaluate inflation on a month-to-month basis before making any decisions, Das clarified.
