RBI projects 7.2% GDP growth for FY25, CPI inflation to moderate at 4.5%

• The Reserve Bank of India has projected the GDP growth for FY25 at 7.2%.
• The central bank has said that the CPI inflation is expected to remain moderate at 4.5%.
• The MPC has once again kept the repo rate unchanged at 6.5%.

The Reserve Bank of India (RBI) has projected India's real GDP growth for FY25 at 7.2%, while CPI inflation for the fiscal year is expected to moderate to 4.5%, post the central bank’s Monetary Policy Committee (MPC) meeting on Wednesday.

Das said, "Real GDP growth for 2024-25 is projected at 7.2%. With Q2 at 7%, Q3 at 7.4% and Q4 7.4%. Real GDP growth for Q1 of next financial year that is 2025-26 is projected at 7.3% and the risks are evenly balanced."

RBI left the repo rate unchanged at 6.5% for the tenth consecutive time. The central bank also changed its policy stance to neutral.

According to RBI Governor Shaktikanta Das, growth for the fiscal year will be supported by robust quarterly performances.

However, Inflation in the third quarter is forecasted to be a little higher at 4.8%, with further moderation anticipated in the fourth quarter when the kharif harvest comes. However, RBI cautions that agricultural output remains susceptible to weather-related shocks, which could influence inflationary trends.

In contrast to India's Gross Domestic Product (GDP) growth for the first quarter of FY25, Das said, "Real GDP grew by 6.7% in the first quarter of this financial year, that is, 2024-2025, and this was led by a revival in private consumption and improvement in investment. The share of investment in GDP reached its highest level since 2012-2013. Government expenditure, on the other hand, contracted during the first quarter."

He added, "On the supply side, gross value added, that is, GVA, expanded by 6.8%, surpassing the GDP growth, aided by strong industrial and services sector activities. High-frequency indicators available so far suggest that domestic economic activity continues to be steady."

On the liquidity front, surplus conditions prevailed in August, September, and early October, though liquidity levels shifted back in late September.

However, the agriculture and services sectors remained strong, and government consumption showed signs of improvement. Private investment intentions are also improving, reflecting growing confidence in the economy.

Das said, "MPC noted that currently, the macroeconomic parameters of inflation and growth are well balanced."

However, he cautioned that while headline inflation is on a downward trajectory its pace is slow, "Headline inflation is on a downward trajectory, though it's pace has been slow and uneven. Going forward the moderation in Headline inflation is expected to reverse in September and likely to remain elevated in the near term due to adverse base effects among other factors."

Das stated, offering some optimism for relief, "Food inflation pressure could see some easing later in the financial year on the back of strong kharif sowing adequate buffer stock and good soil moisture conditions. Domestic growth has sustained its momentum with private consumption and investment growing in tandem."

He also pointed out that domestic growth has continued to show resilience, driven by private consumption and investment.

"Resilient growth gives us the space to focus on inflation so as to enable its durable descent to the 4% target. The MPC decided to remain watchful of the evolving outlook in the coming months", he added.\

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