The potential growth rate reflects the maximum rate at which an economy can grow over the long term without causing inflation. Das made these remarks during the Bretton Woods Committee’s annual Future of Finance Forum in Singapore, as reported by Reuters. The governor’s comments were made outside his prepared speech.
Governor Das noted that the RBI anticipates a 7.2% economic growth by year-end, attributing the slower growth in the first quarter to reduced government spending during the national elections. In his speech, he addressed the ongoing impact of high-interest rates globally, stating, “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.”
Das projected a gradual reduction in inflation, expecting it to ease from 5.4% in 2023-24 to 4.5% in 2024-25 and further to 4.1% in 2025-26. “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,” he stated. He emphasized caution, adding, “The momentum of global disinflation is slowing, warranting caution in easing monetary policy.”
Governor Das also highlighted the necessity for central banks to manage monetary policy prudently while governments need to implement proactive supply-side measures. He mentioned that a potential shift in the U.S. monetary policy, aiming for a soft landing, could offer some hope for a sustained reduction in global inflation.