India can achieve sustainable growth of up to 8%, RBI chief says

India can achieve sustainable economic growth of up to 8% over the medium term, according to the country’s central bank governor.

His comments come shortly after data showed India’s gross domestic product slowed to 6.7% in the second quarter, down from 8.2% when compared to the same period last year. The figures have ratcheted up pressure on the central bank to launch its own rate-cutting cycle sooner rather than later.

Speaking to CNBC’s Tanvir Gill Friday in an exclusive interview, Reserve Bank of India (RBI) Governor Shaktikanta Das said the country’s expected growth rate over the next few years stood at 7.5%, “with upside possibilities.”

Das said it was difficult to say what healthy growth looks like for the world’s most populous country, but growth of 7.5% to 8% “can be sustainable” over the medium term.

India has previously been described by the International Monetary Fund as “the worlds fastest-growing major economy,” while Goldman Sachs says India is poised to become the world’s second-largest economy by 2075 — overtaking Japan, Germany and the U.S. to become second only to China.

However, India’s growth rate has moderated in recent quarters and the IMF warned in July that economic expansion is likely to slow to 6.5% in 2025.

It comes as major central banks have started to ease monetary policy in recent months, including the European Central Bank, the Bank of England and the Swiss National Bank.

The U.S. Federal Reserve is widely expected to join the rate-cutting club later this week, putting further pressure on India to begin loosening policy.

“This seems to be rate-cut season,” Das said. “But on a serious note, you see our monetary policy will be governed primarily, I would like to stress primarily, by our domestic macroeconomic conditions, by our domestic inflation [and] growth dynamics and the outlook,” he added.

“So, we are governed by that. Yes, of course, what is happening around us, what the Fed does or what the ECB does or what some of the other central banks … do, it does impact us, and we do look at that,” Das said.

“But, eventually, in the ultimate analysis, our decision is driven by domestic factors.”

Policymakers at the Fed have laid the groundwork for an interest rate cut ahead of their two-day meeting, which gets underway on Tuesday. The only remaining question appears to be by how much the Fed will reduce rates.

Some economists have argued the Fed should deliver a 50-basis-point reduction, accusing the central…