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RBI Monetary Policy: FY23 GDP growth forecast retained at 7.2%

While high-frequency indicators suggest improvement in urban demand, the picture for rural demand is mixed.

August 05, 2022 / 11:29 AM IST
Representative image

Representative image

The Reserve Bank of India (RBI) has retained its GDP growth forecast of 7.2 percent for FY23, Governor Shaktikanta Das said on August 5.

Das, delivering his bi-monthly address announcing the Monetary Policy Committee's (MPC) interest rate decision, said Indian economic activity was showing signs of broadening, with high-frequency indicators suggesting improvement in urban demand.

The picture for rural demand, however, is mixed.

"The increase in capacity utilisation, government's capex push and large expansion in bank credit should support investment activity," Das said in his addres.

"At the same time, the domestic economy faces headwinds from global forces - protracted geopolitical tensions; rising global financial market volatility; tightening global financial conditions; and global recession risks," he added.

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Like the full-year growth forecast, the RBI also retained the quarterly projections. As such, GDP growth is seen at 16.2 percent in April-June, 6.2 percent in July-September, 4.1 percent in October-December, and at 4.0 percent in January-March 2023.

GDP growth is then seen picking up to 6.7 percent in the second quarter of 2023, the governor said.

Also read: RBI retains retail inflation forecast at 6.7% for FY23

Although the RBI did not revise its growth forecast, economists from outside the central bank have made downward revisions to their own estimates in recent weeks to take into account the fallout of the Russia-Ukraine war entering its sixth month and the raising of interest rates by the Indian central bank.

The rate hike announced today by the RBI means the repo rate has been raised by 140 basis points so far in FY23.

Late July, the International Monetary Fund cut its forecast for India for FY23 by 80 basis points to 7.4 percent. While this brought it largely in line with the RBI's projections, others have been more aggressive.

In an interview to Moneycontrol earlier this month, former chief statistician of India Pronab Sen said India would be lucky if its GDP grows by 6 percent in FY23. Before that, Nomura cut its growth forecast for India for 2023 to 4.7 percent from 5.4 percent.
Moneycontrol News
first published: Aug 5, 2022 10:38 am
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