India’s economy is projected to have the potential for robust growth, with Reserve Bank of India (RBI) Governor Shaktikanta Das estimating a rate of around 7.5% or more. This projection surpasses the RBI's current forecast of 7.2% for the ongoing financial year. Governor Das made these remarks during the Bretton Woods Committee's annual Future of Finance Forum in Singapore, as reported by Reuters.

The potential growth rate of 7.5% reflects the maximum sustainable rate at which the Indian economy can expand over the long term without triggering inflationary pressures. Das' comments, which were made outside his prepared speech, highlight a more optimistic outlook compared to the RBI's official forecast.

Das attributed the slower growth rate in the first quarter of the year to reduced government spending during the national elections, which impacted economic activity. He also addressed the global economic climate, noting that high-interest rates worldwide are affecting economic conditions. “While quite a few central banks have started treading the path of rate cuts on account of recession worries, many still continue to maintain restrictive stances and refrain from reducing policy rates so as to break the back of inflation persistence,” Das remarked.

Regarding inflation, Das projected a gradual decline, with expectations for it to ease from 5.4% in the fiscal year 2023-24 to 4.5% in 2024-25, and further to 4.1% by 2025-26. Despite the moderation from a peak of 7.8% in April 2022, inflation remains above the RBI's target range of 4%. Das emphasized that while inflation has moderated, there is still a need for vigilance. "Inflation has moderated from its peak of 7.8% into the tolerance band of +/- 2% around the target of 4%, but we still have a distance to cover and cannot afford to look the other way," he said.

Governor Das also stressed the importance of prudent monetary policy management by central banks and proactive supply-side measures by governments. He noted that any potential shift in U.S. monetary policy, aimed at achieving a soft landing, could offer hope for a sustained reduction in global inflation.

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