Despite the reduction in India's first-quarter GDP growth, the South Asian economy is expected to grow by 7.2% for the full year, according to Reserve Bank of India Governor Shaktikanta Das on Thursday. India's economic growth fell to 6.7% year on year in the April-June quarter, falling short of the polled estimate of 6.9% and the RBI's forecast of 7.1%, as a drop in government spending amid national elections weighed.
"Fundamental growth drivers of the Indian economy are not slowing; rather, they are gaining momentum, giving us confidence to say that the Indian growth story is intact," Das said in a lecture at the annual FIBAC banking conference.
Das said agriculture should perform well for the rest of the year thanks to a healthy monsoon, resulting in a further increase in rural demand, while solid investment activity would also get a boost from government spending increasing up pace.
"It is clear that India is on a sustainable growth path. Consumption and investment demand, the two primary drivers of development, are expanding together. Overall, the RBI's prediction of 7.2% GDP growth in 2024-25 appears reasonable."
Das stated that the current balance of inflation and growth is favorable, but emphasized the importance of maintaining price stability to promote growth in the medium to long term. The pace of deflation has been repeatedly disrupted by volatility and high food inflation, according to the CEO.
"It is the headline inflation that counts. "People understand headline inflation, with food inflation accounting for 46%," Das added. He did, however, add that as the monsoon progresses, there is more optimism that the food inflation outlook would improve over the remainder of the year.
"We must be vigilant about how the variables influencing inflation play out. We must effectively travel the final mile of disinflation while maintaining the credibility of the flexible inflation targeting framework, which is a significant structural reform," Das stated.
