RBI lowers FY23 GDP growth forecast to 7.2% due to global headwinds

Reserve Bank of India on Friday lowered India's FY23 GDP growth projection to 7.2 per cent from an earlier estimation of 7.8 per cent.

In a statement after the Monetary Policy Committee's bi-monthly meet, RBI Governor Shaktikanta Das said the real GDP growth is projected at 16.2 per cent in Q1FY23, at 6.2 per cent in Q2; at 4.1 per cent in Q3 and Q4 at 4 per cent, assuming that crude oil (Indian basket) price is at $100 per barrel during 2022-23.

"As the horizon was brightening up, escalating geopolitical tensions have cast a shadow on our economic outlook. Although India's direct trade exposure to countries at the epicentre of the conflict is limited, the war could potentially impede the economic recovery through elevated commodity prices and global spillover channels," he said.

"Further, financial market volatility induced by monetary policy normalisation in advanced economies, renewed Covid-19 infections in some major countries with augmented supply-side disruptions and protracted shortages of critical inputs, such as semi- conductors and chips, pose downside risks to the outlook."

Besides, the governor said that going forward, robust Rabi output should support recovery in the rural demand, while a pick-up in contact-intensive services should help in further strengthening urban demand.

"Investment activity may gain traction with improving business confidence, pick up in bank credit, continuing support from government capex and congenial financial conditions."

"'Capacity utilisation' (CU) in the manufacturing sector recovered further to 72.4 per cent in Q3:2021-22 from 68.3 per cent in the previous quarter, surpassing the pre-pandemic level of 69.9 per cent in Q4:2019-20."

On Friday, the RBI's Monetary Policy Committee (MPC) of the central bank maintained the repo rate, or short-term lending rate, for commercial banks, at 4 per cent.

In addition, the growth-oriented accommodative stance was also retained.

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