Economic growth in India is moving towards the 8% mark, but inflation must be kept under control, according to Reserve Bank of India (RBI) governor Shaktikanta Das on Tuesday. 

“India is at the threshold of a major structural shift in its growth trajectory. We are moving toward annual growth rate of 8%,” Das said during his address to the Bombay Chamber of Commerce and Industry.

Over the last three years, India’s economy grew at an average of 8.3%, the RBI governor added, and in 2023/24 contributed 18.5% to global growth, Bloomberg reports.

Das said the central bank is confident in the 7.2% growth forecast for the current fiscal year, which began in April. 

He noted that the economy's “growth momentum is very strong. I find no reason why the momentum should slow down,” he commented, going on to add that the central bank’s now-casting models indicate stronger momentum.

Furthermore, rural consumption has begun to increase, and the forecast of a good monsoon bodes well for agriculture, the governor said.

Additionally, international agencies are predicting higher global trade volumes this year, which should boost demand for domestically manufactured goods and the services sector.

Indeed, Das said the services sector is “doing extremely well,” but the economy shouldn’t rely on just one sector to maintain growth.

Moreover, in order to sustain stable growth rates, policymakers need to manage inflation, Das added. Although inflation is decreasing and was at 4.75% in May, it still remains above the RBI’s target of 4%. “One severe weather event” could drive up vegetable prices, and the headline inflation “will be at 5%,” he said.

The central bank needs to focus on the inflation target “with a clear and unambiguous focus and commitment.” He stated that any distractions “will severely compromise growth.”

Despite the RBI maintaining the policy rate at 6.5% for over a year, there is increasing demand for rate cuts. A consensus seems to be forming among the external members of the monetary policy committee that high interest rates are hindering growth, the Bloomberg report goes on to add.