MUMBAI: The RBI has lowered its real GDP growth projection for 2024-25 to 6.6% from the earlier estimate of 7.2%. This sharp revision follows a subdued second-quarter GDP growth of 5.4%, compared to the RBI’s earlier estimate of 7%.
The country’s central bank has now pegged third-quarter GDP growth at 6.8% and fourth-quarter GDP at 7.2%. Real GDP growth for the first quarter of 2025-26 is projected at 6.9%, with the second quarter at 7.3%.
“Looking ahead, robust kharif foodgrain production and good rabi prospects, coupled with an expected pickup in industrial activity and sustained buoyancy in services augur well for private consumption. Investment activity is expected to pick up. Resilient world trade prospects should provide support to external demand and exports. Headwinds from geopolitical uncertainties, volatility in international commodity prices, and geo-economic fragmentation continue to pose risks to the outlook,” said the RBI in its monetary policy statement on Friday.
The RBI has also raised its retail inflation projection for 2024-25 to 4.8% from its earlier projection of 4.5%. It sees Q3 inflation at 5.7% and Q4 inflation at 4.5%. CPI inflation for the first quarter of 2025-26 is projected at 4.6%, with Q2 at 4.0%.
“Going forward, food inflation is likely to soften in Q4 with seasonal easing of vegetable prices and kharif harvest arrivals; and good soil moisture conditions along with comfortable reservoir levels auguring well for rabi production. Adverse weather events and rise in international agricultural commodity prices, however, pose upside risks to food inflation. Even though energy prices have softened in the recent past, their sustenance needs to be monitored. Businesses expect pressures from input costs to remain elevated and growth in selling prices to accelerate from Q4,” said the RBI in its policy statement.
Governor Shaktikanta Das, in his speech, said that the near-term inflation and growth outcomes in India have turned somewhat adverse since the October policy. He, however, sees economic activity improving along with rising business and consumer sentiments.
“The recent spike in inflation highlights the continuing risks of multiple and overlapping shocks to the inflation outlook and expectations. Heightened geopolitical uncertainties and financial market volatility add further upside risks to inflation. High inflation reduces the purchasing power of both rural and urban consumers and may adversely impact private consumption,” the governor noted.
