India's Growth Has Always Been Driven By Domestic Demand & Investment: RBI Governor Shaktikanta Das

I think the major achievement of the Reserve Bank of India has been, number one, navigating through this period of crisis of multiple shocks: the COVID pandemic, followed by the war in Ukraine, and in the aftermath of that, the synchronized monetary policy tightening. So multiple shocks, the Reserve Bank has navigated with, I would say, a reasonable amount of success. Secondly, I think we have been able to maintain financial stability in our financial system. I think that's the foremost achievement which we have done. And third, I think in the area of technology, in the area of adoption of technology into central banking, into payment systems. I think by and large, these would be the three major achievements of the Reserve Bank of India over the last five to six years or so.

You see, it's like this: when you have worked in the Finance Ministry earlier and for quite a long time, and then you come to the central bank, you have an understanding of the requirements and the approaches of both the sides. And these are not necessarily conflicting sides. Each—that is, the government and the Reserve Bank, that is, the central bank—they have their assigned roles in the economy. Because I was earlier in the Finance Ministry, I do have a good understanding of what are the expectations that side. And now that I'm in the, you know, now that for the last seven years I've been in the Reserve Bank, I get to know what is the perspective of the central bank. So basically, going forward, while navigating a period of crisis, you know how to balance the objective of growth, which is the objective of the government, and the objective of price stability, which is the mandatory responsibility of the Reserve Bank. I think these two agencies, the government and the Reserve Bank, they need each other for the success of the economy and for the economy to perform in an optimal manner. And there is, therefore, need for always a good amount of coordination. There may be differences of opinion, but there is need for good coordination.

Well, you know, I'll tell you very honestly, I've been asked this many times. I've been asked this many times, even yesterday I was asked this question. But I'll tell you, I have still a few days, you know, few weeks to go, and at the moment I'm just focused on my work and what is on my table. So beyond that, I don't, you know, I don't think or that's not something which distracts me.

You see, I don't want to, you know, sort of, I'm not in the game of one-upmanship. But last year, in all seriousness, when we projected higher growths, I think the opinion outside was that RBI was too optimistic. But ultimately, the growth number which came was even higher than what we had projected. Today, as I'm talking to you, in all seriousness, you see, there are some mixed signals. The festival season, the first quarter, you know, the growth rate was lower than what we had expected. Second quarter numbers will come only at the end of November. Second quarter also there was some unseasonal rains in the month of August, etc., some activities got affected. But even in the festive season, there is some narrative that perhaps the sales figures and certain things have slowed down. But what I would like to emphasize is that there are mixed signals. There are pluses, there are, you know, there are some positives, there are some negatives. But I think the positives significantly outweigh the negatives. So I'll just complete the, so-called slowdown in certain areas that has been significant, that is getting, you know, that is outweighed by the kind of positives that we are getting. And if I can just take half a minute more, you see, agriculture sector is doing exceedingly well this year thanks to a very good monsoon. The expectation on the rabi crop is very good. Rural demand has now revived. That is one area which was languishing for a long time. Even the first quarter GDP number this year at 6.7, which was lower than our estimate of 7.1, even there the consumption demand has shown significant revival. I think if I remember correctly, it was about 7.4 or 7.5, something in that region. And even now also there are many high-frequency indicators, you know, like for example, domestic air passenger traffic, the two-wheeler sales, and there are several high-frequency indicators which are sort of, which are exhibiting a very robust growth. The, you know, the e-commerce in the tier 2, tier 3 cities are showing good numbers. The, you know, so therefore there are substantial amount of high-frequency indicators which indicate that the economy is doing reasonably well. And therefore, and let's also flag what are the risk factors. Let's also say that, let's also recollect, and I would like to mention that the IMF three days ago has projected India's growth at 7%.