The Reserve Bank of India (RBI) has projected FY25 GDP growth and CPI inflation at 7.0 per cent and 4.5 per cent, respectively.

Governor Shaktikanta Das said: “Looking ahead, recovery in rabi sowing, sustained profitability in manufacturing and underlying resilience of services should support economic activity in 2024-25.” 

Among the key drivers on the demand side, household consumption is expected to improve, while prospects of fixed investment remain bright owing to an upturn in the private capex cycle, improved business sentiments, healthy balance sheets of banks and corporates; and government’s continued thrust on capital expenditure.

“Improving outlook for global trade and rising integration in global supply chain will support net external demand. Headwinds from geopolitical tensions, volatility in international financial markets and geo-economic fragmentation, however, pose risks to the outlook,” Das said in his monetary policy statement.

Taking all these factors into consideration, real GDP growth for 2024-25 has been projected at 7.0 per cent with Q1 at 7.2 per cent (earlier projection: 6.7 per cent) ; Q2 at 6.8 per cent (6.5 per cent); Q3 at 7.0 per cent ( 6.4 per cent); and Q4 at 6.9 per cent, with the risks evenly balanced.

As per the December 2023 monetary policy review, real GDP growth for FY24 is projected at 7.0 per cent with Q3 at 6.5 per cent; and Q4 at 6.0 per cent.

“Domestic economic activity remains strong. The first advance estimates (FAE) placed the real gross domestic product (GDP) growth at 7.3 per cent for 2023-24, marking the third successive year of growth above 7 per cent.

“Going forward, the momentum of economic activity witnessed during 2023-24 is expected to continue in the next year (2024-25),” Das said.

Inflation

The Governor observed that going forward, the inflation trajectory would be shaped by the evolving food inflation outlook.

“Rabi sowing has surpassed last year’s level. The usual seasonal correction in vegetable prices is continuing, though unevenly.

“Yet considerable uncertainty prevails on the food price outlook from the possibility of adverse weather events. Effective supply side responses may keep food price pressures under check,” Das said.

He emphasised that the continuing pass-through of monetary policy actions and stance is keeping core inflation muted. Crude oil prices, however, remain volatile.

Manufacturing firms, covered in the Reserve Bank’s enterprise surveys, expect some softening in the growth of input costs and selling prices in Q4 of 2023-24, while services and infrastructure firms expect higher input cost pressures and growth in selling prices.

Taking into account these factors, CPI inflation is projected at 5.4 per cent for 2023-24 with Q4 at 5.0 per cent (earlier projection: 5.2 per cent).

Assuming a normal monsoon next year, CPI inflation for 2024-25 is projected at 4.5 per cent with Q1 at 5.0 per cent (earlier projection: 5.2 per cent); Q2 at 4.0 per cent (4.0 per cent); Q3 at 4.6 per cent (4.7 per cent); and Q4 at 4.7 per cent, with the risks evenly balanced.

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