On Friday, the Reserve Bank of India (RBI) increased the GDP growth forecast for the ongoing fiscal year from 6.5% to 7%, citing robust domestic demand and increased capacity utilization in the manufacturing sector. While announcing the bi-monthly monetary policy, RBI Governor Shaktikanta Das acknowledged potential risks to the growth outlook due to prolonged geopolitical turmoil and global economic fragmentation. The central bank opted to maintain the interest rates at 6.5% in its monetary policy statement.
For the 2023-24 fiscal year, the RBI projected real GDP growth at 7%, with growth estimates of 6.5% and 6% for the December and March quarters, respectively. The growth projections for the next fiscal’s first, second, and third quarters are 6.7%, 6.5%, and 6.4%, respectively. In the 2022-23 fiscal year, the Indian economy expanded by 7.2%. The RBI’s growth projection surpasses estimates by international agencies, with the IMF, World Bank, ADB, and Fitch anticipating a 6.3% expansion in the current fiscal year.
The RBI highlighted the positive impact of buoyant public sector capital expenditure, robust manufacturing capacity utilization, and domestic demand on growth. Despite external demand weaknesses, exports were positive in October. The central bank expects private consumption to benefit from rural demand, manufacturing, and services buoyancy, while the healthy balance sheets of corporations, business optimism, and government infrastructure spending will boost public sector capital expenditure.
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