India should aim to sustain its growth momentum and expand by at least 7% in the coming fiscal year, the Reserve Bank of India said in its annual state of the economy report released this week.
For real growth to be inclusive and sustained, inflation has to be bound to its target of 4% by the second quarter of the year, as projected, and get anchored there, RBI said.
The government’s first advance estimates recently showed that India’s real GDP will grow by 7.3% in fiscal 2024, above the 7.2% growth in the previous fiscal.
The National Statistical Office’s estimate is 30 basis points higher than the latest Reserve Bank of India estimate of 7% for FY24. One basis point is one-hundredth of a percentage point.
The banking regulator also called on financial institutions to strengthen their balance sheets and improve asset quality, alongside the ongoing consolidation of fiscal and external balances.
“The virtuous thrust to investment from government capex must be partnered and even led by the corporate sector, supplemented by foreign direct investment,” RBI said in the report.
The Indian economy recorded stronger than expected growth in 2023-24, primarily due to a shift from consumption-based growth to investment-driven growth, the report said, adding that the government’s increased focus and spending on capital expenditure is beginning to have a positive effect on private investment.
“The government’s thrust on capex is starting to crowd-in private investment,” the report said, implying that the government’s spending in areas such as infrastructure and development is encouraging the private sector to also invest more in the economy.
Citing RBI governor Shaktikanta Das, the report said, “New opportunities are knocking at our doors. It is for us to capitalize on them. There has to be a greater focus on investment in capacity building, skilling of human resources and adoption of newer technology by all players. The international confidence on India’s prospects is at a new high; it is an opportune time to make this India’s moment and work towards strong, sustainable and inclusive growth.”
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