India should target at least 7% growth in FY25: RBI bulletin

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MUMBAI : India should look to grow by at least 7% in 2024-25, sustaining the better-than-anticipated growth in the ongoing financial year, say the authors of an article in the Reserve Bank of India's January bulletin. On 17 January, RBI governor Shaktikanta Das said he expected India's gross domestic product (GDP) growth to touch 7% in FY25.

In the ongoing financial year, India's economy is expected to grow at 7.3% in FY24, 30 basis points higher than what RBI had forecast in December, as per the government's recent first advance estimates. While the article in the January bulletin was written by RBI officials, it had the usual disclaimer that the views were those of the authors and not of the central bank.

For India's economy to grow at 7% or higher in FY25, inflation needs to align with RBI's target of 4% by the second quarter, and the balance sheets of financial institutions need to be strengthened and their asset quality improved, the authors state. Also, the government’s thrust on investments should be partnered and even led by the corporate sector, supplemented by foreign direct investments, they added.

The Indian economy has typically been driven by domestic consumption, followed by investments and exports. But the National Statistical Office’s first advance estimates of India’s national income for 2023-24 had a positive surprise—a shift from consumption to investment on the back of the government's thrust on capital expenditure, the authors said.

As Mint reported on 1 January, new projects worth ₹2.1 trillion were announced in the three months to December, up 15% from the September quarter, as per data from the Centre for Monitoring Indian Economy. “The rate of real fixed investment is at a historic high in