The Reserve Bank of India’s rate-setting council expects the Indian economy to grow at 7% in FY25, Governor Shaktikanta Das declared on Thursday.

Das also revealed that the MPC has kept benchmark lending rates at 6.5% for the sixth time in a row. The attitude has remained consistent, with the panel focusing on withdrawing accommodation to ensure that inflation gradually aligns with the objective while sustaining growth.

In its December meeting, the Monetary Policy Committee (MPC) forecasted a 7 percent growth rate for the Indian economy in FY24. GDP growth rates for Q3FY24 and Q4FY24 were set at 6.5 percent and 6.0 percent, respectively, while real GDP growth rates for Q1FY25, Q2FY25, and Q3FY25 were set at 6.7 percent, 6.5 percent, and 6.4 percent.

In its First Advance Estimate, the Centre predicted that the Indian economy will increase by 7.3% in FY24. If realised, this may be India’s third consecutive year of 7 percent or higher growth, according to Das.

India’s economy grew by 7.2% in FY23. In 2023, the Indian economy remained the fastest expanding major economy.

“Domestic economic activity is proving resilient. In Q2FY24, real GDP increased by 7.6 percent year on year, driven by strong investment and government spending, which offset the drag from net external demand. On the supply side, gross value added (GVA) increased by 7.4 percent in Q2, underpinned by robust manufacturing and construction activity,” the MPC stated at the last meeting.

India’s economy has remained resilient despite a global economic slowdown and six central bank rate hikes since 2022, thanks to strong consumer and government expenditure, a robust services sector, and expanded manufacturing. Prime Minister Narendra Modi’s administration has increased infrastructure spending, and foreign corporations are increasingly investing in India, notably in technology production, as an alternative to China.

Ongoing wars and conflicts, as well as the creation of new flashpoints in various regions of the world, with the Red Sea disruption being the most recent in the sequence, all add unpredictability to the global macroeconomic picture, according to RBI Governor Shaktikanta Das.

“On one hand, the odds of soft landing have increased with Inflation moving closer to the target and growth holding up better than expected in major advanced and emerging market economies,” Shaktikanta Das, said.