November 7, 2024
India’s Growth Story Remains Strong, Real GDP Projected to Grow 7.2% in FY25: RBI Governor
Business Science & Tech

India’s Growth Story Remains Strong, Real GDP Projected to Grow 7.2% in FY25: RBI Governor

The Reserve Bank of India (RBI) Governor, Shaktikanta Das, affirmed that India’s growth trajectory remains robust, with real GDP expected to grow at 7.2% in the fiscal year 2024-25. He highlighted that key drivers of this growth—consumption and investment demand—are gaining traction.

Das noted that private consumption, a critical component of overall demand, is showing promising prospects due to improved agricultural conditions and increased rural demand. Additionally, sustained growth in the services sector is likely to bolster urban demand, while government expenditure at both central and state levels is anticipated to accelerate in line with budget estimates.

“Investment activity is expected to benefit from rising consumer and business confidence, ongoing government emphasis on capital expenditure, and the healthy financial positions of banks and corporations,” he added.

According to the RBI’s projections, real GDP growth for FY25 is anticipated to be 7.2%, with quarterly estimates of 7.0% for Q2, 7.4% for Q3, and 7.4% for Q4. For the first quarter of FY26, real GDP growth is projected at 7.3%.

In terms of inflation, the Consumer Price Index (CPI) for 2024-25 is forecasted at 4.5%, with quarterly projections of 4.1% for Q2, 4.8% for Q3, and 4.2% for Q4. The CPI for Q1 FY26 is expected to be 4.3%.

Das mentioned that the CPI for September is likely to experience a significant increase due to unfavorable base effects and rising food prices, attributed to shortages in the production of onions, potatoes, and chana dal (gram) during the 2023-24 period.

He emphasized that domestic growth has maintained its momentum, with private consumption and investment growing in tandem. “This resilient growth allows us to focus on ensuring inflation sustainably aligns with the 4% target. Given the current inflation and growth conditions, the Monetary Policy Committee (MPC) deemed it appropriate to adopt a ‘neutral’ stance, aiming for a durable alignment of inflation with our target while supporting growth,” Das noted.

Looking ahead, the RBI will remain agile and adaptable in its liquidity management strategies. “We will use a suitable mix of tools to manage both frictional and durable liquidity, ensuring that money market interest rates evolve in an orderly fashion,” he concluded.

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