India set for real GDP growth of 7.5% as inflation stays cool: Axis Bank chief economist Neelkanth Mishra

India's economic trajectory, characterized by robust growth projections and contained inflation, is a critical area of study for competitive exam aspirants. Axis Bank's chief economist, Neelkanth Mishra's projection of 7.5% real GDP growth for the next fiscal year, coupled with headline inflation around 4%, signals a period of economic stability and potential for a softer monetary stance from the Reserve Bank of India (RBI). This outlook is not merely a forecast but reflects the culmination of various policy initiatives, global economic shifts, and domestic resilience.

**Background Context and What Happened:**

India has demonstrated remarkable resilience in the face of global economic headwinds, including geopolitical tensions, supply chain disruptions, and inflationary pressures. The projected 7.5% real GDP growth comes on the back of several years of significant government-led capital expenditure, which has crowded in private investment. The ‘reforms and supportive policies’ mentioned are multifaceted, encompassing initiatives like the Production Linked Incentive (PLI) schemes designed to boost domestic manufacturing, infrastructure development projects under the National Infrastructure Pipeline, and continued efforts towards ease of doing business. Post-pandemic recovery saw a surge in demand, and the government's fiscal policy, emphasizing capital spending over revenue expenditure, has laid a strong foundation. The RBI, under its flexible inflation targeting framework adopted in 2016, aims to keep Consumer Price Index (CPI) inflation at 4% with a tolerance band of +/- 2%. The expectation of headline inflation staying around 4% suggests that the efforts to manage price stability, through both monetary and supply-side measures, are yielding results. A softer monetary stance implies that the central bank might either maintain its current interest rates or even consider cuts, providing further impetus to economic activity.

**Key Stakeholders Involved:**

Several crucial stakeholders are at play. First, the **Reserve Bank of India (RBI)**, as the central bank, is the primary custodian of monetary policy and inflation management. Its Monetary Policy Committee (MPC), established under the RBI Act, 1934 (specifically Sections 45ZA to 45ZF), is responsible for determining the policy interest rates required to achieve the inflation target. Second, the **Government of India (GOI)**, through its fiscal policies outlined in the Union Budget, plays a pivotal role in driving growth through public expenditure, tax policies, and structural reforms. The projections by economists like Neelkanth Mishra, representing institutions like **Axis Bank**, provide independent analysis that informs market sentiment and policy discourse. Finally, **businesses and the general public** are critical stakeholders, as they are directly impacted by economic growth (job creation, investment opportunities) and inflation (purchasing power, cost of living).

**Significance for India and Historical Context:**

This projection holds immense significance for India. A 7.5% real GDP growth rate would position India as one of the fastest-growing major economies globally, attracting further foreign direct investment (FDI) and bolstering investor confidence. Stable inflation at 4% ensures that the benefits of growth are not eroded by rising prices, protecting the purchasing power of citizens. Historically, India has witnessed periods of high growth (e.g., the 2000s) often accompanied by inflationary pressures. The current scenario of high growth with contained inflation is a testament to improved macroeconomic management and institutional frameworks like the inflation targeting regime. The economic reforms initiated in 1991 laid the groundwork for a market-oriented economy, and subsequent governments have built upon this foundation with targeted policies. The **Fiscal Responsibility and Budget Management (FRBM) Act, 2003**, while its targets have been revised, underscores the government's commitment to fiscal prudence, which complements monetary policy efforts.

**Future Implications and Constitutional/Legal Framework:**

The continuation of high growth and low inflation implies several future implications. It provides the government with greater fiscal space to invest in social sectors, education, and healthcare, potentially accelerating poverty reduction and human development. For the RBI, a softer monetary stance could translate into lower borrowing costs for businesses and consumers, stimulating investment and consumption. However, challenges remain, including global economic slowdowns, geopolitical uncertainties, and the need for sustained private sector investment. The constitutional framework, while not directly prescribing GDP targets, empowers the government to formulate economic policies (e.g., through the Union Budget, which is presented under **Article 112** of the Constitution) and the RBI to manage monetary policy under its statutory mandate. The **Economic Survey**, released annually before the Union Budget, provides a detailed review of the economy and prospects, often aligning with such projections. India's ability to maintain this balance between growth and inflation will be crucial for achieving its long-term development goals and strengthening its position on the global stage.