Reserve Bank of India (RBI) Governor, Shaktikanta Das, said the expansion of the world’s fastest-growing major economy needs to pick up to around eight percent to deal with poverty and other challenges.

While the past few years average growth of around 7.5 per cent was impressive, the expectation is India can be better,” Das said at an International Monetary Fund (IMF) event in Washington on Friday. He also said more structural reforms were needed in areas such as land and labour.

India is expected to post real economic growth of 7.2 per cent in the 2019-2020 fiscal year, and is seeing below-target inflation even as rising oil prices add an upside risk, the governor said. Still, he added that the inflationary impact from spikes in crude -- India’s biggest import -- can be exaggerated.

If there is a temporary spike of oil prices and again it comes down, then obviously the impact gets moderated,” Das said. Any sustained increase in crude prices will definitely have an impact on inflation, but we have to see how sustained it is.

Higher oil prices over the longer term may hurt India’s growth as well as its current account deficit, factors which would drag the rupee down. The recent oil spike is occurring against a backdrop of consumption suffering from a crisis in the shadow banking sector and exports stagnating amid a global slowdown -- all of which has seen India’s growth prospects dim.

Read: A rate cut for the second consecutive time was on expected lines

The RBI reduced interest rates by a quarter-percentage point last week, the second cut in as many meetings chaired by Das who took charge in December after Urjit Patel’s sudden resignation. Despite the easing, the RBI still retained its neutral policy stance.

“Our priority is to remain watchful and take coordinated action to revive growth, and maintain macroeconomic, financial and price stability,” he said in Washington.

The central bank last week lowered the growth forecast for the fiscal year that began April 1 to 7.2 per cent from 7.4 per cent seen previously. It also expects headline inflation and underlying price pressures to remain subdued in coming months, giving it some more room to lower rates.

India has one of the highest real rates of interest in Asia and thats often been cited as a reason why investors hold back. Companies have also shied away from borrowing ahead of a general election campaign that kicked off April 11. The results will be known May 23.

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