Indian economy to grow at 7% in FY25, inflation to ease further: RBI Governor at Davos

Shaktikanta Das

The Reserve Bank of India (RBI) Governor Shaktikanta Das on January 17 said that the Indian economy is likely to grow 7 percent in the next financial year 2024-25.

"The government for structural reforms undertaken in recent years, saying they have boosted the medium and long-term growth prospects of the Indian economy," Das said while speaking at a CII session on 'High growth, low risk: The India story' at Davos during the World Economic Forum Annual Meeting.

Further, the RBI Governor added that amid a challenging global macroeconomic environment, India presents a picture of growth and stability.

Last month, the central bank raised its GDP growth forecast for 2023-24 by a huge 50 basis points to 7 percent following the big upside surprise in the July-September data.

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Announcing the Monetary Policy Committee's interest rate decision on December 8, RBI Governor Shaktikanta Das said the Indian economy is a "picture of resilience and momentum" amid an unsettled global economic backdrop.

Data released on November 30 showed India's GDP growth came in at 7.6 percent in July-September, well above the consensus forecast of 6.8 percent and down only slightly from 7.8 percent recorded in April-June.

Das also said that inflation will ease further from the current levels.

Recent information on the global economic front has been reassuring with inflation falling, though growth remains low, Das added.

"Chances of soft landing have improved and markets have reacted positively. However, geopolitical risks and climate risks remain matters of concern," Das said.

India's headline retail inflation rate in December accelerated to a four-month high of 5.69 percent. The Consumer Price Index (CPI) inflation print in November was 5.55 percent.

At 5.69 percent, the latest CPI inflation figure is below expectations, with economists having predicted prices likely rose 5.9 percent year-on-year in December.

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While headline retail inflation rose again in December - it has now spent 51 consecutive months above the Reserve Bank of India's (RBI) medium-term target of 4 percent - it has undershot forecasts for the second month running, ensuring that it has been lower than the Indian central bank's forecast of 5.6 percent for October-December.

To fight higher inflation, the RBI since May, 2022, has raised repo rate by 250 basis points (Bps) before pausing last year in April.

In December, 2023, monetary policy, the RBI kept repo rate unchanged for the fifth time in a row and remained focused on withdrawal of accommodation to ensure that inflation progressively aligns to the target while supporting growth, also said that improved momentum in investment demand and continued business and consumer optimism would support domestic economic activity and ease supply constraints.