Sanjeev Sanyal warns: Chasing GDP growth above 7% could push inflation past 6%

Sanjeev Sanyal, economist and member of the Prime Minister's Economic Advisory Council, has cautioned against pushing India's economic growth much beyond 7% under current conditions. He warned that faster expansion could drive inflation above the Reserve Bank of India's 6% upper tolerance limit.

His comments came after the International Monetary Fund (IMF) raised India's growth forecast for 2026-27 to 7%, from 6.4% estimated in July. China is projected to grow at 4.5%.

"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," Sanyal wrote on Tuesday. "The game is to maintain this for next 30 years. This is a marathon; not a sprint."

The economist urged the policy-makers should ignore those who keep pushing for ever faster growth irrespective of the 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 said.

The noted economist also said India must preserve its economic stability to benefit from future opportunities. "Good times too will come, but we have to be around unscathed in order to take advantage of it."

The Monetary Policy Committee (MPC) sets the RBI's benchmark interest rate and works 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%. The decision came ahead of the release of September's retail inflation data, which showed consumer price inflation rising to 5.54%. Food inflation stood at 7.74%.

IMF raises India's growth forecast

In its latest World Economic Outlook report, released at its annual meeting in Bangkok, the IMF said India's economy would expand 7% in 2026-27, supported by resilient domestic demand and strong services activity.

It also raised its growth projection for 2027-28 to 7%, from 6.7% estimated in July. The fund said India's medium-term outlook had improved, citing sustained economic momentum, favourable demographics, a large and expanding domestic market, and continued structural reforms.

The IMF said India's economy had remained resilient despite higher oil prices.

Global growth outlook remains weak

The IMF projected global output to grow at an average annual rate of 3.2% in 2028-31, below the historical average of 3.7% recorded between 2000 and 2019.

It said the medium-term outlook had become increasingly uneven, with downgrades concentrated among economies directly affected by the West Asia conflict and energy-importing emerging and developing economies, excluding India.

The report also said recent trade agreements, including those between India and the European Union, India and the Mercosur bloc, and India and the United Kingdom, could reduce tariff and non-tariff barriers, help economies adjust to trade policy changes, and strengthen supply chains.