RBI MPC Member Nagesh Kumar claims India can achieve GDP growth of over 6.5% in the current situation. He also commented on investment, inflation, and global recession.
India Growth Forecast: Nagesh Kumar, a member of the Reserve Bank of India's Monetary Policy Committee (MPC), has expressed confidence that the Indian economy can easily achieve a growth rate of over 6.5% in fiscal year 2024-25, despite prevailing global challenges. He described India as a "bright spot" for the global economy.
India's Strength: Domestic Consumption
Nagesh Kumar stated that India's economic growth is primarily driven by domestic consumption and investment. This is why a decline in global trade or exports has a limited impact on India. He explained that while many economies worldwide are facing debt crises and recession, India remains stable due to its internal demand.
Growth Rate Expected to Exceed 7%
Nagesh Kumar expressed hope that India will not only maintain a 6.5% growth rate but may also reach 7% to 7.5% in the coming years. This is attributed to a b domestic infrastructure, government policies, and a growing trend of private investment.
Inflation Under Control, But No Hasty Interest Rate Cuts
The retail inflation rate (CPI) is currently at 2.1%, below the RBI's target of 4%. This demonstrates the success of monetary policy. However, regarding interest rate cuts, Nagesh Kumar clarified that decisions cannot be based solely on one month's inflation data. He said that the decision to cut rates should be based on broad macroeconomic indicators.
The next monetary review meeting is scheduled for August 2025, and the market expects that interest rates may be cut if inflation remains under control.
New Opportunities from India-US Trade Agreement
The proposed Bilateral Trade Agreement (BTA) between India and the United States could also be a significant opportunity for India. Kumar said that this could provide India with greater access to the US market for labor-intensive sectors such as textiles, footwear, furniture, and other products. India has the availability of affordable labor, which makes these sectors more competitive.
However, he also stated that India has some concerns regarding the agriculture and dairy sectors. In this context, he suggested that options such as a quota system could be considered to provide limited market access.
Optimism Regarding FDI, Explained the Difference Between Net and Gross
Nagesh Kumar stated that gross FDI has increased to $81 billion in 2024-25, compared to $71 billion in the previous year. The reason net FDI appears lower is that the net figure is obtained by subtracting funds repatriated from investments made abroad. He emphasized that the real picture comes from gross inflows, which are currently b in India's favor.
He cited a UNCTAD report stating that global FDI flows fell by 11% in 2024, reaching $1.5 trillion. Despite this, investor interest remains in developing countries like India.
India: A Center of Attraction for Global Investors
Nagesh Kumar believes that India's political stability, b policy framework, and favorable environment for growth are attracting foreign investors. This interest in FDI may increase further in the coming years, especially in sectors such as manufacturing, infrastructure, and technology.
