Governor of the Reserve Bank of India (RBI), Shaktikanta Das stated that India’s growth potential is around 7.5% or higher, surpassing the central bank’s forecast of 7.2% for the current financial year.

This potential growth rate represents the economy’s long-term growth capacity without causing inflation.

Das made this statement during the Bretton Woods Committee's annual Future of Finance Forum in Singapore, as reported by Reuters news agency.

The governor added that the central bank anticipates the economy will achieve 7.2% growth by the end of the year, noting that slower growth in the first quarter was due to reduced government spending during the national elections. 

He also highlighted in his speech that the risks from a prolonged period of high interest rates continue to be a potential concern.

“While quite a few central banks have started treading the path of rate cuts on account of recession worries, many still continue to maintain restrictive stances and refrain from reducing policy rates so as to break the back of inflation persistence decisively,” Das stated.

He also noted that the RBI's projections suggest inflation is expected to decline from 5.4% in 2023-24 to 4.5% in 2024-25, and further to 4.1% in 2025-26, The Times of India reports.

“Inflation has moderated from its peak of 7.8% in April 2022 into the tolerance band of +/- 2% around the target of 4%, but we still have a distance to cover and cannot afford to look the other way. The momentum of global disinflation is slowing, warranting caution in easing monetary policy,” the central bank governor stated.

Moreover, he stressed the need for central banks to manage monetary policy prudently and for governments to take proactive supply-side measures. 

Das also said that the anticipated shift in US monetary policy, with a potential soft landing, brings optimism for continued global inflation reduction.