India’s economy continues to showcase resilience, bolstered by steady growth and favorable market fundamentals. According to Reserve Bank of India (RBI) Governor Shaktikanta Das, several economic positives are driving India’s growth trajectory, although inflationary pressures are rising, particularly in food and fuel prices. October’s inflation rate is anticipated to be notably higher than September’s due to increased costs in essential commodities, spurred by global tensions and unpredictable weather events.
Economic Growth Fundamentals The robust demand in India’s manufacturing and services sectors highlights a strong economic foundation. Consumer spending, boosted by a positive agricultural outlook and improving rural demand, along with solid growth in the services sector, has led to optimistic growth projections. The RBI estimates India’s real GDP growth to remain around 7.2% for FY2024-25, as domestic consumption and investment stay healthy. This strength gives India a cushion to absorb inflationary challenges while keeping the economy on a stable growth path.
Inflation Risks and Management The inflation trajectory, however, is a critical focus for the RBI. Driven by adverse weather impacts on food production and high global oil prices, inflation risks remain elevated. Das noted that October’s inflation data is expected to rise beyond September’s 5.49%, with pressures primarily from food and fuel. Nevertheless, the central bank anticipates that inflation could moderate by the last quarter of the fiscal year as better harvests stabilize food supplies, provided there are no further disruptions.
Balancing Growth and Inflation The RBI has opted to maintain interest rates at the current level, striking a careful balance between fostering growth and controlling inflation. Das emphasized that India’s economic resilience, along with vigilant monetary policies, will be key to managing these pressures. While some analysts speculate potential rate cuts if food inflation stabilizes, the RBI has signaled a “wait-and-watch” stance, focusing on data-driven adjustments to prevent runaway inflation while supporting sustainable economic momentum.
