After opting for a status quo for the tenth consecutive policy review, Governor Shaktikanta Das on Wednesday (October 9, 2024) said the Reserve Bank’s elevated rates are not impinging on growth.

He pointed to the strong economic activity over the last 18 months since the RBI has opted for the status quo to back up his claim.

“At the moment, we do not see any evidence of higher interest rates impinging on growth,” the Governor told reporters in the customary post-policy interaction.

He added that growth continues to be “very robust”, and investment intentions are “quite visible”. “The growth is holding firm, holding steady. So, it would not be correct at this point of time to say that interest rates are impinging on growth,” he added.

India’s GDP expanded by 8.2% in FY24, and the RBI is sticking to its higher-than-consensus estimate of 7.2% for FY25. The first quarter growth decelerated to a 15-quarter low of 6.7%, leading a slew of analysts to peg their estimate between 6.5-7% for FY25.

Some of the members of the rate-setting panel who ended their term recently had also spoken out about their fears of elevated rates hurting the growth in the economy.

To a question on why the RBI has chosen to retain its 7.2% growth estimate for the fiscal, Mr. Das said that a slew of factors including consumption and investment activity make the RBI go towards that number.

Factors aiding the growth include private capital expenditure showing signs of picking up, deleveraged balance sheets of corporates, bountiful rains aiding agricultural output, reservoir levels and soil moisture which will help the winter crop as well, strength in rural consumption, urban consumption remaining strong, and services sector doing well.

“So if you put all these things together, I think it gives us the number that ... is 7.2%,” Mr. Das said. He said the growth in the first quarter would have come at above 7% if one were to account for the higher subsidy outgo from state governments which drags down the overall growth.

The RBI expects growth in the second half of the fiscal to come at higher than levels expected earlier.

Replying to the same, Mr. Das said the second half of the fiscal year has begun just now and the RBI believes growth is being maintained.

When asked about conflicting signals being seen from the monthly purchasing manager index surveys on both manufacturing and services showing a dip, Mr. Das said it is a mixed bag at all points of time with both pull and push factors playing out.

“The overall sense is that even the services Purchasing Managers’ Index (PMI) or the manufacturing PMI are still at highly elevated levels, and I think probably the PMI numbers of India globally are the highest among all countries,” Mr. Das said.