Sanjeev Sanyal, a prominent economist and member of the Prime Minister's Economic Security Council, has issued a stark warning against India aggressively pursuing economic growth rates substantially above 7% under current conditions. Sanyal cautioned that such a push could lead to inflation exceeding the Reserve Bank of India's (RBI) upper tolerance limit of 6%.
Macro-Stability Over Rapid Expansion
His comments follow the International Monetary Fund (IMF) raising India's growth forecast for 2026-27 to 7%, an increase from its July estimate of 6.4%. China, in contrast, is projected to grow at 4.5%.
Sanyal likened India's economic journey to a marathon, not a sprint, stressing the importance of sustained growth over decades. He noted, "Not only is India now unequivocally the fastest-growing major economy, the gap between India and China is similar to the lead China enjoyed 1990-2020. The game is to maintain this for next 30 years. This is a marathon; not a sprint."
He urged policymakers to prioritize macro-stability, advising against yielding to calls for ever-faster growth irrespective of the prevailing external environment. "In my judgement, a GDP growth rate of much more than 7 per cent under current circumstances will push inflation past the 6 per cent bound. MPC is correct in sounding cautious. Never sacrifice macro-stability," Sanyal stated.
RBI's Inflation Mandate
The Monetary Policy Committee (MPC) of the RBI is tasked with setting benchmark interest rates to keep inflation within the central bank's target range. Earlier this month, the MPC raised the benchmark repo rate by 25 basis points to 5.50%. This decision preceded the release of September's retail inflation data, which indicated consumer price inflation had risen to 5.54%, with food inflation at 7.74%.
Sanyal reiterated that India must safeguard its economic stability to fully capitalize on future opportunities. "Good times too will come, but we have to be around unscathed in order to take advantage of it," he added.
Global Economic Outlook and India's Resilience
The IMF's latest World Economic Outlook report, presented at its annual meeting in Bangkok, highlighted India's economic resilience despite higher oil prices. The report cited robust domestic demand, strong services activity, favorable demographics, and ongoing structural reforms as key drivers for India's improved medium-term outlook.
Globally, the IMF projected an average annual growth rate of 3.2% between 2028 and 2031, which is below the historical average. The report noted an increasingly uneven medium-term outlook, with downgrades concentrated in economies affected by the West Asia conflict and energy-importing emerging economies, with India being a notable exception to this trend.