India aims for sustainable growth with 7% target in FY25: RBI

India GDP growth: The Reserve Bank of India (RBI) stressed the importance of sustaining current growth momentum and achieving a real GDP growth of at least 7 per cent in the next fiscal year, according to its monthly bulletin released on Thursday, January 18.

"In India, potential output is picking up with actual output running above it, although the gap is moderate," stated the RBI in an article titled 'State of the Economy.'

Earlier this month, the statistics office projected annual growth of 7.3 per cent, the highest among major global economies, for the current fiscal year ending in March.

The RBI's current projection stands at 7 per cent, with the possibility of an upward revision during its monetary policy review meeting on February 8.

"Inflation needs to align with the target by the second quarter of the year, as projected, and get anchored there," said the central bank.

The RBI stressed the need for financial institutions to strengthen their balance sheets and improve asset quality, emphasising the ongoing consolidation of fiscal and external balance sheets.

"The virtuous thrust to investment from government capex must be partnered, and even led, by the corporate sector, supplemented by foreign direct investment," stated the RBI.

In a separate article on the impact of food prices on inflation, the RBI highlighted that significant and persistent changes in food prices can have a lasting impact on headline inflation.

"Policymakers need to determine the sources and nature of food price shocks to minimise the risks of overreacting to transitory shocks as well as looking through persistent shocks," it noted.

The RBI also acknowledged the pressure on global supply chains due to recent attacks on commercial ships on the Red Sea trade route, necessitating rerouting via the Cape of Good Hope in South Africa.

“These developments impart considerable uncertainty to the near-term outlook for India's merchandise trade.”

(With Reuters inputs.)