Inflation curbed, but challenges remain, says RBI Governor Shaktikanta Das

Inflation in India has moderated, but there is still a way to go, said Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday at the Bretton Woods Committee’s annual Future of Finance Forum in Singapore.

“Inflation has moderated from its peak of 7.8 per cent in April 2022 to within the tolerance band of /- 2 per cent around the 4 per cent target, but we still have a distance to cover and cannot afford to look the other way,” Das stated.

The RBI’s projections suggest that inflation will likely ease further from 5.4 per cent in 2023-24 to 4.5 per cent in 2024-25 and 4.1 per cent in 2025-26.

Meanwhile, fiscal consolidation is underway, and public debt levels are on a declining trajectory over the medium term. Corporate performance has improved significantly, enabling deleveraging and robust growth in profitability. Das noted that the balance sheets of banks and non-banking financial intermediaries regulated by the RBI have also strengthened. “Our stress tests reveal that these financial intermediaries will be able to maintain regulatory capital and liquidity requirements even under severe stress scenarios,” Das added.

For 2024-25, the RBI projects real GDP growth at 7.2 per cent, with risks evenly balanced around this forecast. Das highlighted that the Indian economy rebounded from the severe contraction caused by the Covid pandemic, averaging real GDP growth of above 8 per cent during 2021-24.

The growth outlook reflects the underlying strength of India’s macroeconomic fundamentals, with domestic drivers — private consumption and investment — playing a significant role. Moreover, this growth trajectory is supported by an environment of macroeconomic and financial stability.

Significant dip by 2026

The RBI’s projections indicate that inflation is likely to ease from 5.4 per cent in 2023-24 to 4.5 per cent in 2024-25 and 4.1 per cent in 2025-26. Also, public debt levels are on a declining trajectory over the medium term.