RBI Guv Shaktikanta Das Confident In 7.2% Growth Forecast Despite Q1 Slowdown

India's economy has shown resilience despite a slight slowdown in GDP growth during the April-June quarter, registering a 6.7 per cent expansion compared to 7.8 per cent in the previous quarter. Reserve Bank of India (RBI) Governor Shaktikanta Das attributed this dip to a temporary reduction in government spending due to the Lok Sabha elections, which traditionally curtails expenditure on major projects to ensure electoral impartiality.

Speaking at a conference organised by the Federation of Indian Chambers of Commerce and Industry (Ficci) and the Indian Banks' Association (IBA), Das highlighted that, when excluding government consumption, the GDP growth rate would have been a stronger 7.4 per cent, underscoring the robust performance of other economic sectors. He pointed out that both private consumption and investment, crucial drivers of economic growth, showed impressive gains. Private consumption surged to 7.4 per cent from 4 per cent in the latter half of the previous fiscal year, reflecting a rebound in rural demand. Investment, which constitutes about 35 per cent of GDP, grew by 7.5 per cent, demonstrating strong economic momentum.

Looking ahead, Das anticipated an increase in government expenditure in the remaining quarters of the fiscal year, aligning with budgetary forecasts. He expressed optimism regarding inflation trends, noting a decrease in the Consumer Price Index (CPI) to 3.54 per cent in July—the lowest in nearly five years. However, food inflation remains a concern at 5.4 per cent. Das acknowledged the need for vigilance in managing inflationary pressures while maintaining economic growth.

Das attributed India's growth resilience to several key reforms, including the shift to a market-determined rupee exchange rate, the introduction of the Fiscal Responsibility and Budget Management Act, and the Insolvency and Bankruptcy Code. He emphasized that while progress has been made, further improvements are necessary, particularly in enhancing the ease of doing business at local levels to boost competitiveness.

Despite the quarterly dip, the RBI's forecast for economic expansion remains unchanged at 7.2 per cent for the fiscal year, reflecting confidence in the country’s long-term growth trajectory and economic stability.