India has the potential to grow at 7.5 percent or more, Reserve Bank of India (RBI) governor Shaktikanta Das has said, which is a little above the central bank's full-year forecast for 2024 of 7.2 percent.

"I think India's potential growth today... is about seven-and-a-half-percent-plus," Das said at the Bretton Woods Committee's annual Future of Finance Forum on September 13. The forum was held in Singapore in partnership with Swiss bank UBS.

"This year, we expect at the end of the year to record 7.2 percent," the governor said, with slower growth in the first quarter mostly due to low government expenditure during the Lok Sabha election.

Das said India's merchandise export improvement was below expectation as external demand was not as robust as before, though services exports had picked up.

Das also suggested that interest rates were unlikely to be cut anytime soon and the central bank would have to stay the course. "Inflation has moderated from its peak of 7.8 percent in April 2022 into the tolerance band of +/- 2 per cent around the target of 4 percent but we still have a distance to cover and cannot afford to look the other way," Das said.

India’s inflation rose slightly to 3.65 percent in August from 3.6 percent in the previous month, as a favourable base from last year helped contain consumer inflation despite an uptick in food categories, data release on September 12 showed.

It was for the second successive month that the retail inflation stayed below the 4 percent mark and 12 months in a row that it was came in below the RBI's 6 percent threshold. .

The Reserve Bank’s projections indicate that inflation is likely to ease further from 5.4 percent in 2023-24 to 4.5 percent in 2024-25 and 4.1 percent in 2025-26, Das said.

He also pointed out the stress in the global commercial real estate (CRE) sector, which needs to be watched closely. "Banks exhibit high sensitivity to expected and unexpected CRE losses, due to the relatively high CRE coverage ratios in their loan books. Further, liquidity squeezes can materialise for banks with large CRE exposures, as short sellers may target them and investor confidence may slip further."

Das said that staying alert and undertaking forward looking regulatory measures could contain the risks to bank balance sheets and systemic stability.

The RBI held rates steady for the eighth consecutive time in August at 6.5 percent.

With Reuters input