RBI downgrades FY23 GDP growth projections to 6.8% - lower than World Bank and other global agencies

• RBI has changed its projections twice on how the country’s economy will expand this financial year.
  
  
• RBI’s predictions are a tad lower than that of multiple agencies like CRISIL, S&P, Moody’s and SBI Ecowrap which expect India’s FY23 GDP to grow by 7%.
  
  
• RBI predicts that the inflation for the current financial year will be at 6.7% and says the battle against inflation is not over.

India’s central bank on Wednesday downgraded its GDP growth outlook for FY23 to 6.8% from 7% it had predicted in September this year. This is the second time that the RBI has changed its outlook on how the country’s economy will expand, from 7.2% it had expected during the start of the year.

“A growth of 6.8% is considered very strong in the current context when the world economy is going through an acute slowdown,” said RBI governor Shaktikanta Das in his monetary policy committee statement as he announced a 35 basis point hike in the headline rate.

Das added that in spite of the marginal revision, India would be amongst the fastest growing major economies in the world.

The governor said that the second quarter GDP growth which came in at 6.3%, is in line with the central bank’s expectations. As per its central bank’s latest predictions, the third quarter GDP growth is at 4.4% and fourth quarter to grow at a pace of 4.2%.

In the first quarter of FY24, it expects GDP to pick up pace at 7.1% before moderating to 5.9% in the second quarter of the next financial year.

RBI’s predictions are a tad lower than that of multiple agencies like CRISIL, S&P, Moody’s and SBI Ecowrap which have recently downgraded India’s FY23 GDP growth outlook to 7%.

The Indian central bank’s outlook is also lower than that of the World Bank which had upgraded its outlook to 6.9% on Tuesday. India's economy grew 8.7% in FY22.

‘Will continue to keep an Arjuna’s eye on inflation’

Reiterating his comments that he would continue to keep an Arjuna’s eye on inflation, as he predicts that the inflation for the current financial year to be at 6.7%. The inflation rate for the third quarter is projected to be at 6.6% and go down to 5.9% in the last quarter of the current financial year.

Saying that the effects of ‘imported inflation’ are expected to remain high, he added that the battle against inflation is far from over.

“The problem of inflation is not over, we will closely monitor the data and assess the situation and the outlook, and will be ready to act. Our actions will be nimble and in the best interests of the economy,” Das said.

Economic activity has stayed strong, with urban consumption showing sustained growth, as seen in services consumption like travel, year on year growth in auto sales. Rural demand is also recovering as seen in tractor sales. The Rabi acreage sown is 6.8% higher than what it was last year, as of December 2.

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