India needs to achieve an 8 per cent growth rate to sustain its progress, according to Challa Sreenivasulu Setty, Chairman of the State Bank of India (SBI). He said that achieving this target will require a boost in both consumption and private capital expenditure.
“India definitely requires a growth rate of 8 per cent to progress, but this (current) growth rate (of around 6 per cent) is not to be really worried about… We must realise that the slowdown which we are talking about could be a blip. The long-term story of India is intact,” Setty told The Indian Express in an interview.
While private capital expenditure is gaining momentum in select sectors, Setty believes that there is a need for increased investment in core industries such as steel and cement. "They all have reached the capacity utilisation of 75-76 per cent," he noted.
Setty, who assumed the role of SBI Chairman in August 2024, also believes stronger consumption trends will drive higher growth. “Rural consumption is alright, but we may have to see the trend post rabi harvesting. But broadly some of the indicators are better. In terms of urban consumption, the expectations of consumption have been created. Now, the Budget proposed there will be no tax on annual income up to Rs 12 lakh,” he told The Indian Express.
India's economy expanded by 6.2 per cent in the December 2024 quarter and is projected to grow by 6.5 per cent for the full financial year 2024-25. The Reserve Bank of India (RBI) has forecast a 6.7 percent GDP growth rate for the upcoming financial year 2025-26.
Highlighting positive signs in consumption patterns, Setty pointed to an increase in the Private Final Consumption Expenditure (PFCE), which has reached 7.6 per cent. “There are certain sectors which are slightly slower than others, such as the auto segment. The auto sector witnessed very good growth in October-November, but December onwards it has slowed down. But overall, private consumption seems to be moving in a positive direction,” he told The Indian Express.
On private sector investments, Setty acknowledged concerns among companies regarding external uncertainties. “…how tariffs are going to work out or if a particular country is not able to export, then whether the dumping will happen here. But I think these are all concerns which we feel that can be overcome,” he said.
Setty expressed optimism that once consumption strengthens, private capital expenditure would follow in sectors yet to witness such investments. He revealed that SBI's corporate lending pipeline currently stands at approximately Rs 4 lakh crore, with half of it sanctioned but awaiting disbursement, and the other half still under discussion. "This is a significant pipeline and the sectors also are diversified other than the core sector," he said.
On concerns about trade tensions, Setty remarked that India’s export basket is diverse both in terms of products and geographies. “While every export matters, and even if you are exporting $10 billion or $20 billion to the US, the impact will be there, but it will not be as significant in our view. What is the most important in the whole tariff talk is about the narrative,” he told The Indian Express.
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