India is on the verge of a significant structural transformation in its economic growth, aiming for an annual gross domestic product (GDP) growth rate of 8%, according to Shaktikanta Das, Governor of the Reserve Bank of India (RBI). Speaking at the 188th Annual General Meeting of the Bombay Chamber of Commerce and Industry, Das emphasized the importance of maintaining stable inflation levels to ensure the country’s long-term growth trajectory.
The Indian economy recorded an impressive 8.2% growth in FY24 and averaged 8.3% over the last three financial years. The RBI has projected GDP growth for the current fiscal year at 7.2%, and Das believes the nation is poised to sustain growth around 8% in the near future. “India is at the threshold of a major structural shift in its growth trajectory, moving towards 8% GDP growth in a sustained manner,” Das remarked, stressing that this would mark a significant step forward for the country’s economic aspirations.
Das highlighted the global impact of India’s economic performance, noting that India contributed 18.5% to global growth in FY24. “That is eighteen and a half per cent of global growth driven by India’s growth,” he said. This is a substantial increase from just seven or eight years ago when India’s share of global growth was much smaller, reflecting the country’s rise as a global economic force.
However, Das underscored the critical role inflation plays in determining the sustainability of this growth. He reiterated the RBI’s commitment to achieving the inflation target of 4%, emphasizing that stability in inflation is essential for fostering both domestic and foreign investment. “High inflation makes the economy uncompetitive and an unfavourable destination for both domestic and foreign investment. Above all, high inflation lowers the purchasing power of the people, especially the poor,” Das explained.
He warned that any deviation from the inflation target could severely hinder the country’s growth prospects. “One serious weather event, and vegetable prices may go up, pushing inflation to 5%. We must remain focused and committed to bringing inflation down to 4%,” Das stated, adding that there can be no distractions or wavering at this stage. A failure to control inflation, he noted, could compromise the broader economic growth the country is striving for.
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Das also highlighted the importance of inclusive growth, stating that when the country grows, all sections of society—rich and poor alike—must benefit. He stressed that keeping inflation at the targeted level of 4% would help ensure that everyone benefits from the country’s growth.
Looking ahead, Das emphasized that India’s growth story cannot depend on a single sector. “What India has been experiencing and what India needs in the future is growth that is driven by multiple sectors,” he said. Whether it is manufacturing, services, or exports, Das insisted that a multi-sectoral approach is essential for sustaining the country’s growth. “A large country like India cannot rely on one sector alone. Our approach to growth must involve multiple sectors to ensure long-term success,” he added.
In terms of India’s external sector, Das pointed out that it remains stable, with the current account deficit for FY24 standing at just 0.7% of GDP, a marked improvement from 2% in FY23. The reduction was primarily driven by higher services exports and a lower merchandise trade deficit. “India’s current account registered a surplus in the final quarter of FY24, mainly due to a surge in services exports,” Das explained. The current account deficit decreased to $23.2 billion in FY24, down from $67 billion in FY23.
India’s services sector has been a major contributor to the nation’s economic resilience, helping to offset the challenges posed by a wide merchandise trade deficit. Das underscored the importance of maintaining external sector stability to support the country’s overall economic growth.
In conclusion, Das’ comments reflect a confident outlook for India’s economy, with the nation poised for an 8% GDP growth rate. However, he also highlighted the significant challenges ahead, particularly regarding inflation control and the need for growth across multiple sectors. As India continues to navigate a complex global economic environment, maintaining stability, focusing on inclusive growth, and managing inflation will be key to sustaining its upward trajectory.
