The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) has kept its growth projection for India's GDP at 6.5% for the 2023-24 fiscal, Governor Shaktikanta Das announced on October 6, Friday.

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“Real GDP growth for the current financial year that is 2023-24 is projected at 6.5% with quarter two at 6.5%; quarter three at 6% and quarter four at 5.7%. The risks are evenly balanced. Real GDP growth for the first quarter of next financial year that is ’24-25 is projected at 6.6%,” Das said as part of his bi-monthly policy announcement.

Das noted that global headline inflation could remain high for longer than estimated, however, in contrast, domestic economic activity exhibits resilience on the back of strong domestic demand.

The RBI Governor said private sector capex is gaining ground, capacity utilisation in the manufacturing sector continues to trend up and that augers well for economic activity.

On the demand side, steady expansion seen in urban consumption and rural consumption is showing revival, he said, adding that healthy balance sheets of banks and corporates auger well for the economy.

"Looking ahead, domestic demand conditions are likely to benefit from sustained buoyancy in services, consumer and business optimism, government's continued thrust on capex, healthy balance sheets of banks and corporates, and supply chain normalisation," he said.

Headwinds from geopolitical tensions and geoeconomic fragmentation, volatility in global financial markets, global economic slowdown, and uneven monsoon, however, pose risks to the outlook, Das pointed out.

The central bank has also maintained its inflation forecast at 5.4% for the current financial year. However, for the second quarter (July to September), it expects CPI inflation to come in at 6.4% as against the projection of 6.2% earlier.

The headline inflation based on the Consumer Price Index (CPI) moderated to 4.6% in the first quarter of 2023-24 as compared to 7.3% in the same period a year ago. "A significant easing of inflation pressures from its exceptionally high level in July and August is expected to materialise in September as the impact of fleeting food price shocks wanes," Das said.

RBI has projected the CPI inflation for Q2 at 6.4%, Q3 at 5.6%, and Q4 at 5.2%. The risks are evenly balanced. CPI inflation for the first quarter of 2024-25 is projected at 5.2%. In the August monetary policy, too, the inflation for the current fiscal was projected at 5.4%.

Das said while growth remains on track, the declining trend in inflation was interrupted in July-August 2023 due to price shocks in certain food items. Volatile energy and food prices in the wake of lingering geopolitical tensions and adverse weather conditions render uncertainty to the inflation outlook.

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Catch all RBI MPC Policy decision highlights here

(Edited by : Amrita)

First Published:Oct 6, 2023 10:25 AM IST