New Delhi, Aug. 21 -- India's economy may outperform the central bank's forecasts this financial year, according to Deputy Governor Poonam Gupta, as growth closer to 7% leaves policymakers watching for the need to raise borrowing costs if it further fans inflation.

In a speech on Thursday, Gupta painted an upbeat picture of India's economy, based on stronger-than-expected high-frequency indicators. She added that a 7.5% pace "is a given" for India over the long-term, and that "we should aspire to do better than that."

Gupta's comments add to increasingly optimistic assessments of India's outlook, suggesting the country is set to remain the world's fastest-growing major economy. Expectations of strong economic growth also shows why Gupta...