NEW DELHI: RBI deputy governor Poonam Gupta on Friday expressed confidence in India's macroeconomic fundamentals, stating that the country can sustain a growth rate of 7.5% while keeping inflation low. She also noted that the ongoing conflict in West Asia has not significantly affected India's balance of payments situation.
Structural Strengths Supporting Growth
Speaking at a conference organized by the Isaac Centre for Public Policy at Ashoka University, Gupta highlighted India's inherent and structural strengths, including robust remittances, strong net services exports, and healthy foreign direct investment (FDI). While acknowledging an increase in portfolio flows, she indicated that structural factors would likely alter the situation over time.
Impact of West Asia Conflict on Remittances
When asked about the war's effect on remittances, the RBI deputy governor argued that as tensions ease, migrants are expected to return to West Asia. She added that reconstruction efforts and what she termed "revenge spending" would support remittance flows going forward.
Optimistic Growth Outlook
Gupta expressed optimism about the Indian economy, noting that growth has surprised on the upside for the past three years, averaging around 7.5%, while inflation has remained below 4%. She emphasized that the situation remains dynamic, and the RBI will assess growth and inflation projections ahead of next month's monetary policy committee meeting.
Monetary and Fiscal Policy Coordination
In a detailed presentation on the monetary policy framework, Gupta stated that both monetary and fiscal policies are working together to ensure macroeconomic stability. She underscored that the current monetary policy framework, which targets inflation at 4% within a band of 2-6%, has served India well.
