External Shocks Held Back India’s GDP Growth From Crossing 8%: RBI Deputy Governor

New Delhi, Oct 28 (KNN) India's real GDP growth would have exceeded 8 per cent over the past three years but for external shocks, Reserve Bank of India (RBI) Deputy Governor Poonam Gupta said on Tuesday.

Speaking at the Business Standard BFSI Insight Summit, Gupta noted that India had sustained growth of over 7 per cent despite an unfavourable global environment, adding that an improvement in external conditions could boost growth by 50 basis points to 1 percentage point, PTI reported.

Reforms Have Strengthened Growth Potential

She attributed the economy's resilience to reforms since 1991, stronger institutions, digital infrastructure and greater participation of states in economic development. 

“Just based on the strength of that work, we would have already been an 8 per cent growth economy,” Gupta said.

She added that accelerating growth would require higher domestic investment, attracting foreign direct investment (FDI) and learning from other countries.

Fuel and External Financing Remain Challenges

Gupta highlighted that fuel and external financing remain challenges, while food availability is less of a concern despite El Nino conditions.

“Food is not a challenge; if anything, we are becoming an exporter. This year is El Nino, but even then it is managed very well,” she said.

She emphasised that fiscal policy could cushion the initial impact of supply shocks through targeted supply-side measures, provided these remain consistent with fiscal prudence and macroeconomic stability.

“Due to constant policy actions and adaptation, the economy has become less sensitive to some of the shocks that used to impact the economy much more in the past, whether it is the volume of oil used, deficiency in rainfall, etc,” Gupta noted.

AI Unlikely to Cause Widespread Job Losses

On artificial intelligence, Gupta said concerns about technology-driven job losses were overstated, adding that such displacement had not historically occurred on the scale feared and was unlikely with the current technological shift.

Debt-to-GDP Ratio Expected to Decline

On public finances, she highlighted that the gap between government borrowing costs and nominal GDP growth puts India in a favourable position, with the debt-to-GDP ratio expected to decline under a business-as-usual scenario.

(KNN Bureau)