Central bank lowers real GDP growth estimate for FY23 to 7% from 7.2%

RBI Governor Shaktikanta Das

Reserve Bank of India (RBI) governor Shaktikanta Das projected real GDP growth rate for FY23 at seven percent on September 30 down from the 7.2 percent estimated earlier.

The central banker estimated growth for the second quarter of FY23 at 6.3 percent (versus 6.2 per cent earlier), for the third quarter at 4.6 percent (4.1 per cent earlier) and for the fourth quarter at 4.6 percent (four per cent earlier).

Economists resonated with the RBI's optimism about India's growth rate

"At 7%, India might be one of the strongest economies in the world.  The RBI has struck the right note of being cautiously optimistic about both Indian growth and inflation," Monika Halan, Author and Adjunct Professor NISM, said.

"The FY2023 growth estimate of 7% is broadly in line with expectations though slightly on the optimistic side," said, Suvodeep Rakshit, Senior Economist , Kotak Institutional equities.

A global issue surrounding India's growth rate - Russia Ukraine Crisis

" RBI's lower projection for the current financial year of GDP at 7% must be seen in the context of the global crisis around inflation and growth rates at the moment," said Halan. "The next 18 months are very tough for the US, Europe and UK and any dampening of demand from these countries will have an impact on Indian exports."

"The RBI seems confident of India’s growth trajectory even as it acknowledged some risks from the external demand on exports," Rakshit added.

"The biggest global risk for growth rate is the long-drawn conflict between Ukraine and Russia and the corresponding inflationary pressures that it causes through supply chain bottlenecks. The policy responses from the global central banking regulators exacerbate the problem for emerging markets like India through currency volatility requiring market intervention efforts through the deployment of the forex reserves," according to Vivek Iyer, Partner, Financial Services- Risk at Grant Thornton Bharat.

However, there is still hope amid the looming global crisis. "There is strong service export and the domestic demand remains strong post pandemic," according to Halan.

Growth rate for the first quarter of FY24 has been revised to 7.2 percent from 6.7 percent earlier.