RBI raises GDP growth forecast to 7% for FY24

The Reserve Bank of India (RBI) has revised upwards the GDP growth projection for the ongoing fiscal year from 6.5 per cent to 7 per cent. The upward adjustment is attributed to robust domestic demand and increased capacity utilisation in the manufacturing sector.

RBI Governor Shaktikanta Das, while announcing the bi-monthly monetary policy, stressed upon the positive impact of buoyant domestic demand and heightened manufacturing activity on the growth outlook. However, he cautioned about potential risks arising from prolonged geopolitical turmoil and global economic fragmentation.

Maintaining the status quo, the RBI decided to keep the interest rates unchanged at 6.5 per cent. Looking ahead to the 2023-24 fiscal year, the central bank envisions a real GDP growth rate of 7 per cent, with specific quarter-wise estimates. 

The projections indicate growth rates of 6.5 per cent and 6 per cent for the December and March quarters, respectively. For the following fiscal year, growth rates are anticipated at 6.7 per cent, 6.5 per cent, and 6.4 per cent for the first, second, and third quarters.

The RBI's optimistic outlook contrasts with predictions from international agencies. The IMF, World Bank, ADB, and Fitch anticipate a 6.3 per cent expansion in India's GDP for the current fiscal year, while S&P expects growth to be 6.4 per cent.

Factors contributing to the RBI's positive outlook include strong public sector capital expenditure (capex), robust capacity utilisation in manufacturing, and resilient domestic demand. Despite external demand challenges, October witnessed positive trends in exports. 

The central bank highlighted the potential for private consumption to benefit from rural demand, manufacturing activities, and service sector buoyancy. Additionally, a healthy corporate balance sheet, business optimism, and government infrastructure spending are expected to boost public sector capex, according to Governor Das.

During the current fiscal year, the total flow of resources to the commercial sector reached Rs 17.6 lakh crore, a substantial increase from the previous year's Rs 14.5 lakh crore. 

The RBI's positive assessment reflects a confluence of factors supporting India's economic growth amidst a challenging global environment.

(With PTI Inputs)