The Indian economy is set for a major structural shift, aiming for a sustained 8% growth rate, according to the RBI Governor Shaktikanta Das. However, he cautioned that any misstep in monetary policy could derail this growth trajectory.
Speaking at the Annual General Meeting of the Bombay Chamber of Commerce on Tuesday, Das defended the monetary policy committee's (MPC) decision to maintain the 4% inflation target.
He emphasized the importance of avoiding policy errors related to inflation control. Earlier this month, the MPC kept the policy interest rate unchanged at 6.5% for the eighth consecutive time, citing inflationary concerns.
"We have to navigate the path of inflation with a clear and unambiguous focus and commitment to bring down inflation.
There cannot be any distraction at this stage. Any distraction will impact growth. In the game of chess, if you make one wrong move, you can lose the game. In the battle against inflation, one single wrong move can just throw you off track, and coming back to track will be costly," Das said.
Das assured that the Indian economy is not slowing down, highlighting evidence of increased private sector capital expenditure, particularly in sectors such as cement and steel. He stressed the need for multi-sectoral growth to drive the economy forward.
Das also noted that a moderate level of current account deficit (CAD) is desirable for economic stability.
India recorded a current account surplus of $5.7 billion, or 0.6% of GDP, in the March quarter, marking the first surplus in ten quarters. In contrast, the year-ago period saw a CAD of $1.3 billion, or 0.2% of GDP, and $8.7 billion, or 1% of GDP, in the three months ending December 2023.
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