(April 1): Indian Prime Minister Narendra Modi said economic growth should be the Reserve Bank of India’s (RBI) top priority over the next decade, as he praised its management of the economy and the transformation of the banking system over the years.

The RBI’s inflation targeting framework has helped to keep price pressures moderate, Modi said at an event to mark the RBI’s 90th anniversary in Mumbai. The central bank should look at “unique tools” to balance inflation and growth, he said.

“In the next decade, RBI should give growth the highest priority, while focusing on trust and stability,” he said.

The prime minister said the RBI’s turnaround of the banking system in the past decade was notable. The central bank should now “focus on ease in credit access for needy sections”, he added.

Modi is seeking a third consecutive term in office in elections due to kick off in three weeks' time, with the economy’s performance helping to bolster his support among voters. Growth of almost 8% in the fiscal year that ended in March makes India the fastest-expanding major economy in the world. Government officials predict growth will remain fairly rapid at more than 7% in the current financial year.

Governor Shaktikanta Das, speaking earlier at the same event as Modi, said India’s growth was robust, and inflation was moderating.

The RBI has kept interest rates unchanged for six consecutive policy meetings, as it tries to bring inflation down to the 4% target. Many economists predict a rate cut in the second half of the year.

Finance Minister Nirmala Sitharaman, also speaking at the RBI’s event, said stability in the government securities market aided investor confidence and added to overall financial market resilience. The rupee has seen lower volatility, she added.

Strong expansion

Sitharaman said on the weekend that she hopes India would post growth of 8% or more in the January to March quarter, resulting in expansion of 8% or higher in the full fiscal year. The government earlier projected 7.6% expansion for the financial year.

“Gross domestic product growth will get rerated if the projections for the full year come close to 8% as indicated,” Garima Kapoor, an economist at Elara Securities India Ltd, said by phone.

The current data remains strong against the backdrop of a relatively resilient global economy, she said. Capital expenditure by the private sector is also at an “inflection point”, with spending likely to pick up after the elections, she said.

Growth accelerated to 8.4% in the final three months of last year, although the figures were boosted by one-off items. In the previous two quarters, India’s economy expanded at above 8% as well.