(Bloomberg) -- India’s economic growth is inching toward 8% on a sustained manner, but it is essential to keep inflation under check, Reserve Bank of India Governor Shaktikanta Das said on Tuesday. 

“India is at the threshold of a major structural shift in its growth trajectory,” Das said in his address to the Bombay Chamber of Commerce and Industry. “We are moving toward annual growth rate of 8%,” he said. The economy grew at an average 8.3% in the past three years and in 2023-24 contributed 18.5% to global growth, Das added.  

Das said the RBI is confident about its 7.2% growth projection for the current financial year that started in April. Currently, the economy’s “growth momentum is very strong,” Das said. “I find no reason why the momentum should slow down,” he said, adding, the central bank’s now-casting models suggest stronger momentum.

Rural consumption has started picking up and forecast of a good monsoon augurs well for agriculture, he said. International agencies are forecasting global trade volumes to be higher in the current year which should boost demand for goods manufactured in the country and its services sector. 

Das said the services sector in particular is “doing extremely well,” but a large economy like India should not depend on only one sector for sustained growth.

Inflation in Control

To maintain stable growth rates, policymakers must control inflation, Das said. While inflation is moderating and came at 4.75% in May, it is some distance away from the RBI’s target 4%. “One severe weather event,” could push up vegetable prices and the headline inflation “will be at 5%,” Das said.

RBI must aim for the inflation target “with a clear and unambiguous focus and commitment.” He said that any distractions at this stage “will severely compromise growth.”

While the Reserve Bank of India kept policy rate unchanged at 6.5% for more than a year now, the clamor for rate cuts is growing.  A consensus appears to be emerging among the external members of the monetary policy committee that high interest rates are impeding growth.

Economists say a short pause in monsoons recently, with rains below normal, could lead to a delay in sowing of crops and fan concerns among policymakers. Das has argued in the last policy meetings that any “hasty action” will do more harm than good for the economy. 

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