India’s real GDP growth set to hit 7 percent in FY25, says RBI governor in Davos

India’s economic landscape is set to experience a significant upswing in the next fiscal year, as forecasted by the country’s central bank the Reserve Bank of India Governor Shaktikanta Das.

Speaking at the World Economic Forum 2024 to NDTV, Das projected a robust real GDP growth of 7%, paired with a moderating inflation rate closer to the ideal 4% mark.

This optimistic outlook emerges as India recovers from the tumultuous impacts of the COVID-19 pandemic and recent geopolitical upheavals.

Economic recovery and growth

India’s path to economic recovery has been marked by resilience and adaptability. The nation has navigated through the challenges of a global health crisis and geopolitical tensions, emerging with a strong growth trajectory.

Das attributes this to the sustained momentum of economic activities, predicting not just a temporary surge but a sustained period of growth.

This 7% GDP growth projection for the next fiscal year signals India’s entry into a phase of long-term economic expansion, setting it apart from many other economies still grappling with the pandemic’s aftermath.

Inflation and monetary policy

Inflation, a critical concern for both policymakers and citizens, is expected to average around 4.5% next year, aligning closely with the RBI’s tolerance level. This moderation is attributed to effective monetary policy measures and timely government interventions.

The RBI’s strategic approach has been instrumental in taming inflationary pressures, ensuring that it remains within manageable bounds. This balance between growth and inflation underscores the central bank’s role in fostering a stable economic environment.

Sectors griving growth

India’s anticipated economic growth is broad-based, with several key sectors contributing to this positive outlook. Aggregate demand conditions remain buoyant, and there’s a noticeable uptick in investments.

Both government and private sector capital expenditures have been pivotal in driving this growth. Additionally, the agricultural sector, a cornerstone of the Indian economy, is expected to perform better in the coming year. These factors combined paint a picture of a well-rounded and resilient economy, poised for substantial growth.

India in the global context

In the global arena, India stands as an ‘outlier’ amid a widespread slowdown in growth. While other countries continue to struggle with the after-effects of the pandemic and global crises like the Red Sea conflict, India’s macroeconomic stability shines through.

This resilience positions India favourably in handling global challenges and uncertainties, marking it as a key player in the global economic landscape.

The role of fintech in India’s growth

An exciting aspect of India’s economic narrative is its burgeoning fintech space. Innovations like the digital rupee and the Unified Payments Interface (UPI) platform have garnered global interest, underscoring the country’s progress in digital finance.

These advancements not only bolster India’s domestic economic framework but also place it at the forefront of global financial innovation. The economic forecast presented by RBI Governor Shaktikanta Das reflects a period of optimistic growth and stability for India.