RBI anticipates nearly 8% growth for Indian economy

In a recent announcement, Reserve Bank of India (RBI) Governor Shaktikanta Das expressed optimism about the Indian economy surpassing the National Statistical Office's (NSO) growth estimate for the current financial year (FY24). The NSO's second estimate had pegged economic growth at 7.6%, but Das suggested it could potentially approach the 8% mark.

High-Frequency Indicators Signal Strong Momentum

Speaking in an interview with a news channel, Governor Das cited high-frequency indicators and the momentum of economic activity as indicators that the initial estimate could be exceeded. He highlighted a 5.9% growth in Q4 and suggested that when accounted for, the overall growth might well surpass the projected 7.6%, possibly reaching close to 8%.

Governor Das maintained a positive outlook for the next financial year (FY25), reiterating the estimates provided during the February monetary policy review, projecting a 7% growth rate. He attributed the current robust economic growth to improved rural and strong urban demand compared to the previous year.

The governor identified key factors contributing to this economic resurgence, emphasizing strong investment supported by the government and a notable rebound in private capital expenditure (capex). The private capex rebound was particularly evident in sectors such as steel, construction, textiles, and chemicals, signaling a broader economic revival.

Savings Rate Expected to Improve

Addressing the financial landscape, Governor Das discussed the current credit and deposit growth in the economy. While credit growth stands at approximately 16 to 17%, deposit growth is around 12 to 13%. He anticipated an improvement in the savings rate as economic growth strengthens, emphasizing that consumption expenditure is picking up, and as a result, savings rates are expected to improve.

Governor Das reaffirmed the RBI's commitment to achieving a sustainable and enduring 4% inflation rate. He highlighted the importance of sustained and durable inflation around 4% for greater confidence. However, the central bank remains cautious in its monetary policy stance, considering geopolitical uncertainties impacting supply chains and weather-related events affecting food prices.

Addressing concerns about Paytm Payments Bank, which has been instructed to halt deposit and credit transactions after March 15, Governor Das clarified that the measure was specifically targeted at a regulated entity and not against any fintech. He assured that the deadline would not cause disruption for the majority of Paytm app users, as only a small percentage have linked their accounts exclusively to Paytm Payments Bank.