India must grow at 8-10% for 3 decades to meet goals: RBI report

A report published in the monthly bulletin of the Reserve Bank of India (RBI) says India’s economy must grow at 8 to 10 per cent annually over the next three decades for the country to achieve its development goals. The report, titled State of The Economy, also warns that the impact of global warming and geopolitical tension could lead to a rise in inflation.

SUSTAINED GROWTH VITAL

“In order to achieve its developmental aspirations over the next three decades, the Indian economy must grow at a rate of 8-10 per annum over the next decade to reap the demographic dividend that started accruing from 2018 and, as calculations show, will last till 2055,” the report said, adding that the growth in gross domestic product (GDP) of more than 8 per cent that India has been witnessing from 2021 to 2024 would continue.

“For India to harness its favourable demographics and achieve the escape velocity required to breach the low middle income barrier, the developmental strategy over the next few decades must centre around extracting the maximum possible contribution of its young and rising labour force to the growth of GVA (gross value added),” the RBI report, which is a part of its March bulletin, said.

The positive growth trajectory of the country has so far been an outcome of capital deepening, or increase in capital intensity, with improved productivity and sustained public investment buoying the trend, although the Asian Development Bank (ADB) recently observed that there has been renewed vigour in private investment, too.

HEATWAVE, WARS, OIL & INFLATION

The RBI report has warned of certain global realities that could adversely affect overall economy and, in particular, cause a rise in inflation. These include heatwaves and similar hostile climate conditions, as well as ongoing geopolitical tension.

Such global adversities could trigger instability in crude oil prices that may, in turn, play havoc with the inflation index, the RBI report said, adding that Consumer Price Index (CPI) inflation ended at 4.9 per cent in March after averaging 5.1 per cent in the first two months of 2024, and scaling 5.7 per cent in December last year.

“In the near term, however, extreme weather events may pose a risk to inflation along with prolonged geo-political tensions that could keep crude oil prices volatile,” the report said, adding that though food inflation showed signs of moderation lately, it continues to be high and, therefore, a risk to the disinflation trajectory. Essential supervising of food prices was important in the summer of 2024 before the advent of an above-normal monsoon, as predicted by the India Meteorological Department (IMD), would ease food prices.

2024 COULD BE HOTTEST YEAR EVER

Citing the World Meteorological Organization’s (WMO) latest report titled State of the Global Climate 2023, the RBI article revealed there was a strong probability that 2024 would be the hottest year ever on record, even as the crisis of global water shortage deepened all over the world. “Data from the Indian Meteorological Department (IMD) reflects a worrying escalation in extreme weather events necessitating an urgent and collective response,” WMO said, according to the RBI report.

The State of The Economy report is prepared by RBI Deputy Governor Michael Patra along with bank officials. The RBI said the views published were of the authors and not official