The Reserve Bank of India (RBI) has revised the GDP growth forecast for FY24 upwards from 6.5% to 7%. This comes after the second quarter (July-September) FY24 GDP exceeded all forecasts.
The RBI governor Shaktikanta Das in his monetary policy statement said that economic activity exhibited buoyancy in Q2 aided by strong domestic demand, and that GDP posted a robust growth of 7.6 per cent in Q2 of FY24, driven by investment and government consumption.
As per RBI, the country’s economy will grow at 6.5% in Q3 and at 6% in Q4 of FY24. The growth momentum is likely to moderate in FY25 as RBI expects the real GDP to grow at 6.7% in Q1 and 6.5% in Q2 and 6.4% in Q3.
According to the RBI governor, private consumption should gain support from gradual improvement in rural demand, strengthening of manufacturing activity and continued buoyancy in services.
He also expects the healthy twin balance sheets of banks and corporates, high capacity utilisation, continuing business optimism and government’s thrust on infrastructure spending should propel private sector capex.
He feels the drag from external demand is also expected to moderate with a turnaround in merchandise and services exports. However, Das maintains that the protracted geopolitical turmoil, volatility in global financial markets and growing geo-economic fragmentations pose risks to the outlook.
The revised FY2024 GDP growth estimate at 7% was expected, says Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities.
“We believe that inflation risks remain on the upside for at least next few months from food inflation. The good part is that growth remains resilient and core inflation remains under check. We maintain our call for a prolonged pause on repo rate at 6.5% well into FY2025 while liquidity over the medium term will be aimed at being close to neutral," he added.