The Indian economy is poised for a possibly steady period of rapid growth, and it is also in a strong position in light of the country’s substantial dangers. Domestic economic activity is likely to maintain its momentum as income grows to support domestic demand and production or supply capacity expands, as seen by strong levels of investment spending in recent years.
The latest official projection for GDP growth in 2023-24 is 8.2 percent, up from 7% in the previous year. The monsoon rainfall, which is predicted to be normal this year, provides a huge boost to the economy while also lowering food prices. While it is acknowledged that improvements in global demand conditions are required to stimulate external demand for goods and services, significant capital inflows supporting investment reflect both supply-side efficiencies and the economy’s high growth potential in terms of domestic demand as well as
India’s exports.
Concerns are mostly about the impact of risks from bad weather and climatic events, disruptions in global supply chains caused by international wars, and the global economy’s delayed recovery from the recent high inflation period. The current policy rate, along with the gradual reduction in inflation, results in higher real interest rates, but ongoing attention to controlling inflation in line with the target is critical at this stage to support growth.
The RBI, which is mandated to keep inflation at 4% (with a 2% cushion on each side), primarily considers CPI when determining monetary policy.