The Reserve Bank of India (RBI) has projected real GDP growth for FY25 at 7 per cent on the back of strong momentum in the domestic economy.
“Real GDP growth for 2024-25 is projected at 7.0 per cent with Q1 at 7.1 per cent; Q2 at 6.9 per cent; Q3 at 7.0 per cent; and Q4 at 7.0 per cent. The risks are evenly balanced,” RBI governor Shaktikanta Das said unveiling the Monetary Policy for fiscal 2024-25.
The domestic economy is experiencing strong momentum. As per the second advance estimates (SAE), real gross domestic product (GDP) expanded at 7.6 per cent in 2023-24 on the back of buoyant domestic demand. Real GDP increased by 8.4 per cent in Q3, with strong investment activity and a lower drag from net external demand. On the supply side, gross value added recorded a growth of 6.9 per cent in 2023-24, driven by manufacturing and construction activity.
Domestic economic activity is supported by an upturn in the investment cycle on the back of the government’s continued thrust on capital expenditure, higher capacity utilisation, underlying resilience of the services sector, double-digit growth, and healthier corporate and bank balance sheets. Escalating geopolitical tensions, new flashpoints choking arterial routes of global trade, and volatile global financial conditions, however, impart uncertainty to the outlook, the central bank said.
The outlook
Looking ahead, an expected normal south-west monsoon should support agricultural activity. Manufacturing is expected to maintain its momentum on the back of sustained profitability. Services activity is likely to grow above the pre-pandemic trend.
Private consumption should gain steam with further pick-up in rural activity and steady urban demand. A rise in discretionary spending expected by urban households, as per the Reserve Bank’s consumer survey, and improving income levels augur well for the strengthening of private consumption.
| The prospects of fixed investment remain bright with business optimism, healthy corporate and bank balance sheets, robust government capital expenditure and signs of upturn in the private capex cycle. |
Headwinds from geopolitical tensions, volatility in international financial markets, geoeconomic fragmentation, rising Red Sea disruptions, and extreme weather events, however, pose risks to the outlook, the policy statement said.
“Overall, the outlook for growth is improving on the back of domestic drivers of demand, although persisting uncertainties on the global front pose risks to the outlook. Taking into account the baseline assumptions, survey indicators and model forecasts,” the RBI said.
