The Reserve Bank of India (RBI) has projected real GDP growth of 7.2% for FY 2024-25 after the Monetary Policy Committee (MPC) meeting held on Wednesday, along with an expected moderation in Consumer Price Index (CPI) inflation to 4.5%.
RBI Governor Shaktikanta Das said that GDP growth is expected to be 7% in the second quarter, which will increase to 7.4% in the third and fourth quarters. Growth is projected to be 7.3% in the first quarter of the next financial year (2025-26), with risks evenly balanced across various economic indicators.
Das stressed that this growth momentum is supported by strong quarterly performance, particularly from the recovery in private consumption and increased investment. “Real GDP grew by 6.7 per cent in Q1 FY25, led by a revival in private consumption and the highest investment share in GDP since 2012-2013,” he said, though he noted a reduction in government expenditure during the same period.
The RBI governor indicated that Gross Value Added (GVA) grew by 6.8%, higher than GDP growth, due to strong activity in the industrial and services sectors. High frequency indicators point to continued stability in domestic economic activity, which strengthens the positive outlook.
On the inflation front, Das forecast a slight increase in the third quarter to 4.8 per cent, while it is expected to decline further in the fourth quarter due to the kharif harvest. However, he cautioned that agricultural production remains vulnerable to weather-related shocks, which could disrupt inflation trends.
The MPC acknowledged that macroeconomic parameters for inflation and growth appear balanced, but Das expressed caution about the pace of inflation reduction. “Core inflation is moving downwards, but its pace has been slow and uneven. There may be a reversal in September, which will keep inflation high in the near term due to adverse base effects and other factors,” he said.
Despite these challenges, food inflation is expected to moderate towards the end of the fiscal year, thanks to robust kharif sowing, adequate buffer stocks and favourable soil moisture conditions. “Resilient growth allows us to focus on inflation to sustainably reduce it to the target of 4 per cent,” Das said.
