The Reserve Bank of India (RBI) has projected India’s real GDP growth at 7.2% for the fiscal year 2024-25, supported by robust domestic demand and improving economic conditions. According to the monetary policy on October 9, growth is expected to be 7.0% in Q2, rising to 7.4% in both Q3 and Q4. For 2025-26, the RBI forecasts GDP growth at 7.1%, assuming a normal monsoon and no significant external shocks.
“Taking into account the baseline assumptions, survey indicators and model forecasts, real GDP growth is expected at 7.2 per cent in 2024-25 with 7.0% in Q2; 7.4% both in Q3 and Q4 – with risks evenly balanced around the baseline. For 2025-26, assuming a normal monsoon and no major exogenous or policy shocks, structural model estimates indicate real GDP growth at 7.1%, with Q1 at 7.3%, Q2 at 7.2%, Q3 and Q4 both at 7.0%,” RBI governor Shaktikanta Das said in the Monetary Policy.
The central bank said the growth projections are subject to both upside and downside risks. Upside potential comes from strong government capital expenditure, a revival in private investment, favorable monsoon conditions improving the agricultural outlook, and resilient manufacturing and services sectors. Additionally, declining inflation and an improvement in global trade could further boost growth.
However, downside risks include the possibility of prolonged geopolitical tensions, volatility in global financial markets, and climate-related disruptions. Slower global demand, continued supply chain pressures, and rising inflation in services and wages could also weigh on growth prospects.Strong domestic economy
The RBI also noted resilience in the domestic economy, citing strong industrial performance, rising rural demand, and high capacity utilisation. Healthy balance sheets of banks and corporates, coupled with the government’s focus on infrastructure development, contribute to a positive growth outlook. Despite these factors, global uncertainties, lingering conflicts, and supply chain challenges remain concerns.
Forward-looking surveys conducted by the RBI in September 2024 reflect growing consumer confidence and optimism in both the manufacturing and services sectors. The industrial outlook for Q3: 2024-25 has improved, and business expectations are on an upward trajectory, according to other recent surveys.
Professional forecasters expect real GDP growth to remain between 6.9% and 7.0% in 2024-25, with a slight moderation to 6.6%-6.7% in the first half of 2025-26. Despite a dip in Q4:2023-24 growth to 7.8%, the 6.7% growth in Q1:2024-25 reflects the underlying momentum driven by private consumption and investment.
Global risks
The RBI also highlighted global risks that could impact domestic growth. Policy divergence among major central banks, elevated global interest rates, and ongoing geopolitical and trade tensions pose significant challenges. If global growth slows by 100 basis points (bps), domestic growth and inflation could fall by 30 bps and 15 bps, respectively. On the other hand, a faster recovery in global trade and an alignment of monetary policies could result in an upside, with domestic growth and inflation increasing by 15 bps and 7 bps, respectively.
