RBI retains GDP growth forecast of 6.5% for FY24 and FY25

The RBI’s Monetary Policy Committee, on October 6, left the repo rate unchanged at 6.5 percent for the fourth meeting in a row.

The Reserve Bank of India (RBI) has retained its GDP growth forecast of 6.5 percent for 2023-24 and 2024-25, although it has narrowed down the range of its quarterly projections for the next financial year.

In 2024-25, the central bank now sees the quarterly growth rates in the range of 6.3-6.6 percent as against 5.5-7.0 percent it had forecast in April.

Also Read: RBI makes no change to FY24 inflation forecast, implies sub-5% CPI in September

"There are upside and downside risks to this baseline growth path," the RBI said in its latest Monetary Policy Report, released on October 6. While the upside risks include a stronger-than-expected rebound in contact-intensive services, a more vigorous boost to private investment from the government's capex drive and improvement in quality of corporate balance sheets, more resilient global growth, and an early resolution of the geopolitical conflict, risks to the forecast come from an escalation in geopolitical tensions, increase in global commodity prices, weakening of momentum in global trade and demand, and frequent weather-related disturbances due to climate change.

Source: Reserve Bank of India (Note: CI is Confidence Interval)

The quarterly break-up of the growth forecast is as follows:

>> 6.5 percent in July-September 2023

>> 6.0 percent in October-December 2023

>> 5.7 percent in January-March 2024

>> 6.6 percent in April-June 2024

The RBI's latest growth forecast comes a month after data released by the statistics ministry on August 31 showed the Indian economy expanded by 7.8 percent in April-June - marginally higher than economists' expectations of 7.8 percent but lower than the RBI's view of 8.0 percent.

Also Read: CEA Nageswaran says Q1 GDP growth number ‘good’, maintains FY24 forecast of 6.5%

The RBI's growth forecast for the current year is on the higher side, with most other estimates closer to 6 percent, although some did make upward revisions to their projections following the release of GDP data for April-June. However, growth is generally seen falling in 2024-25. Nomura, for instance, expects India's GDP growth to moderate to 5.6 percent next year from 5.9 percent in 2023-24.

In his address today on October 6, RBI Governor Shaktikanta Das expressed confidence in the economy, saying Indian authorities' policies in recent years have fostered macroeconomic and financial stability.

"The twin balance sheet stress that was encountered a decade ago has now been replaced by a twin balance sheet advantage with healthier balance sheets of both banks and corporates. India is poised to become the new growth engine of the world," the central bank chief said.