India must expand by 8–10% over the next ten years, to source out demographic dividend: RBI

The RBI stated that circumstances are favorable for a persistent uptick in real GDP growth, which has averaged more than 8% between 2021 and 2024, in a paper titled “State of the Economy.”

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According to the most recent Reserve Bank of India bulletin, which was published on Tuesday, the Indian economy must expand at a rate of 8–10% per year over the next ten years in order to realize the full benefits of its demographic dividend.

The RBI stated that circumstances are favorable for a persistent uptick in real GDP growth, which has averaged more than 8% between 2021 and 2024, in a paper titled “State of the Economy.”

“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,” RBI said in the bulletin.

The central bank further stated that the goal of the next several decades’ developmental strategy should be to maximize the contribution of its youthful and expanding labor force to the expansion of GVA.

“Raising employability – the set of skills that makes a person more likely to gain employment in a chosen occupation to benefit the person, the workforce, the community and the economy – with a focus on the formalisation of employment opportunities for the youth and women should continue to be the hallmark of the strategy,” it said.

According to recent remarks made by RBI deputy governor Michael Patra, India can develop at a rate of 10% over the next ten years, ranking second in the world economy by 2032 and first by 2050. Patra further emphasized that rising rates of both working-age population and labor force participation will provide India a demographic dividend window that will last for more than three decades.

Possibility of inflation and associated risks

The real GDP estimate of 7% and the consumer price-based inflation estimate of 4.5% for FY25 were likewise maintained by the central bank.

The RBI bulletin also cautioned that there is a danger of inflation due to unpredictable crude oil prices and protracted geopolitical tensions.

“Food inflation, despite some signs of moderation, remains elevated and a potential source of risk to the disinflation trajectory,” the bulletin stated.

“Careful monitoring during the summer is warranted as overlapping food price shocks play out, before an above-normal southwest monsoon this year, as projected by the India Meteorological Department (IMD), enabling an easing of food price pressures. 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,” it added.

In its policy on April 6, the RBI’s Monetary Policy Committee maintained police rates in place, citing the risk of unpredictable food prices.

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