In a recent address, Shaktikanta Das, the Governor of the Reserve Bank of India, highlighted the impressive recovery of India’s economy from the sharp downturn caused by the COVID-19 pandemic. He emphasized that the country achieved an average real GDP growth of over 8% between 2021 and 2024. Looking ahead, the RBI has forecasted a real GDP growth of 7.2% for the fiscal year 2024-25, with risks surrounding this projection being fairly balanced. This optimistic outlook stems from India’s strong macroeconomic fundamentals, with domestic factors such as private consumption and investment playing a pivotal role. The growth trajectory is further reinforced by an atmosphere of financial and macroeconomic stability.
On the inflation front, India has successfully brought inflation down from its peak of 7.8% in April 2022, moving within the RBI’s tolerance band of +/- 2% around the 4% target. However, Das cautioned that the journey isn’t over, and vigilance remains crucial. The RBI’s projections indicate that inflation is expected to decline from 5.4% in 2023-24 to 4.5% in 2024-25 and 4.1% in 2025-26. Simultaneously, fiscal consolidation efforts are progressing, and public debt levels are anticipated to decrease over the medium term. Corporate performance has significantly improved, allowing for reduced leverage and strong profitability growth. Furthermore, the balance sheets of banks and non-banking financial institutions regulated by the RBI have strengthened, with stress tests showing that these institutions can maintain regulatory capital and liquidity even under severe conditions.
