RBI raises FY24 GDP growth forecast to 7% from 6.5% after Q2 surprise

Data released on November 30 showed India’s GDP growth in July-September was 7.6 percent, sharply higher than what economists and the Indian central bank had predicted.

The Reserve Bank of India (RBI) has raised its GDP growth forecast for 2023-24 by a huge 50 basis points to 7 percent following the big upside surprise in the July-September data.

Announcing the Monetary Policy Committee's interest rate decision on December 8, RBI Governor Shaktikanta Das said the Indian economy is a "picture of resilience and momentum" amid an unsettled global economic backdrop.

Also read: RBI MPC Highlights - GDP growth pegged at 7% for FY24, inflation forecast retained

Data released on November 30 showed India's GDP growth came in at 7.6 percent in July-September, well above the consensus forecast of 6.8 percent and down only slightly from 7.8 percent recorded in April-June. This has prompted economists to raise their growth forecasts, with the finance ministry too expected to do the same later this month.

The quarterly break-up of the RBI's revised growth forecast stands as follows:

>> October-December 2023 growth forecast raised to 6.5 percent from 6.0 percent

>> January-March 2024 GDP growth forecast raised to 6.0 percent from 5.7 percent

>> April-June 2024 GDP growth forecast raised to 6.7 percent from 6.6 percent

>> July-September 2024 GDP growth forecast pegged at 6.5 percent.

>> October-December 2024 GDP growth forecast pegged at 6.4 percent

Also read: India's most optimistic economist just got even more bullish

"Looking ahead, private consumption should gain support from gradual improvement in rural demand, strengthening of manufacturing activity and continued buoyancy in services," Governor Das said in his statement, adding that healthy balance sheets of banks and corporates, along with high capacity utilisation, continued optimism among business, and the government's focus on infrastructure should push capital expenditure by private sector.

RBI REAL GDP FORECAST

"The drag from external demand is also expected to moderate with a turnaround in merchandise and services exports. The protracted geopolitical turmoil, volatility in global financial markets, and growing geo-economic fragmentations, however, pose risks to the outlook," he warned.

In its statement, the MPC, which left the repo rate unchanged at 6.5 percent for the fifth time in a row and remained focused on withdrawal of accommodation to ensure that inflation progressively aligns to the target while supporting growth, also said that improved momentum in investment demand and continued business and consumer optimism would support domestic economic activity and ease supply constraints.