India's growth at 6.5% allows scope for policy easing: RBI Dy Guv Gupta

At Business Standard's BFSI Summit 2025, RBI Deputy Governor Poonam Gupta said India's strong growth outlook leaves scope for monetary policy easing while fiscal policy remains conducive for expansion

The Reserve Bank of India (RBI) Deputy Governor Poonam Gupta on Wednesday said that India is growing steadily at 6.5 per cent, with a forecast of 6.8 per cent for the year. However, she added that this is not India’s destination yet, and there remains room for monetary policy easing.

 

Gupta made these remarks at Business Standard’s BFSI Summit 2025 during a fireside chat with Business Standard Editorial Director A K Bhattacharya. She noted that economic growth is the result of multiple factors, including fiscal and monetary policies, structural reforms, entrepreneurship, the availability of key inputs, and domestic demand. 

 

 

Role of monetary policy in supporting growth

 

According to Gupta, monetary policy serves two key roles. The first is to support structural growth by maintaining interest rates at levels appropriate for long-term stability, and the second is to aid cyclical growth when needed.

 

“After that, it is a combination of different factors that make growth possible,” she added.

 

Fiscal policy remains conducive for growth

 

Commenting on fiscal policy, Gupta said it has remained supportive of growth through a better tax system, an increasing focus on capital expenditure over revenue spending, and improved fiscal transparency.

 

She noted that the government’s shift towards productive spending and its emphasis on strong fiscal narratives and transparent budget outcomes have been crucial for sustaining growth momentum.

 

According to her, both fiscal and monetary policies are mindful of their complementary roles in driving balanced growth.

 

Low inflation and its impact on the economy

 

Breaking down inflation into three components—food prices, core inflation, and precious metals—Gupta said these drivers are currently on very different trajectories.

 

“The current deceleration in inflation is mostly, if not fully, driven by food price inflation, which is in a deflationary territory and will likely auto-correct,” she said.

 

She added that core inflation, excluding precious metals, has remained range-bound this year, while the price of precious metals continues to influence overall inflation.

 

“When you have three different drivers of inflation contributing to it, there cannot be a single narrative. A single narrative can only be around the inflation trajectory over the medium to long term,” Gupta explained.

 

India’s resilience in a complex global environment

 

In her keynote address, Gupta highlighted the economic and financial resilience of emerging markets, particularly India, referencing her observations from the recent International Monetary Fund (IMF) annual meetings.

 

She pointed out two contrasting trends discussed at the meetings — the persistence of global policy uncertainty and the unexpected resilience of economies worldwide. “The IMF has even upgraded its global growth forecast,” she said.

 

Gupta noted that while some trade relations may be rebuilt, the era of hyper-globalisation is unlikely to return soon, posing a major structural challenge for emerging markets.

 

Manufacturing challenges and growth outlook

 

Discussing India’s manufacturing potential, Gupta said its growth appears constrained by slowing global trade and the dominance of established international players that are difficult to displace.

 

“The potential of the manufacturing sector seems to have become limited, both due to stalling global trade and because large players continue to dominate markets, making it difficult to displace them through productivity gains,” she said.

 

Gupta added that India’s near-term growth outlook remains strong. After expanding by a better-than-expected 7.8 per cent in the first quarter of the fiscal year, high-frequency indicators suggest that the second quarter will also show robust performance.