RBI MPC Meeting: RBI pegged India’s real GDP growth for FY25 at 7%

RBI Growth Forecast: The Reserve Bank of India has kept the repo rate unchanged at 6.5 per cent and projected the GDP growth for FY25 at 7 per cent on Friday. Beating all the expectations, RBI governor Shaktikanta Das kept the growth forecast unchanged at 7 per cent, as the Street was expecting an upward revision of growth forecasts in the backdrop of more than expected and estimated growth witnessed by the Indian economy in Q2 and Q3 of FY24.

“As per the second advance estimates (SAE), real gross domestic product (GDP) expanded at 7.6 per cent in 2023-24 on the back of buoyant domestic demand. Real GDP increased by 8.4 per cent in Q3, with strong investment activity and a lower drag from net external,” RBI governor Shaktikanta Das said.  

According to Das, an expected normal south-west monsoon should support agricultural activity. Manufacturing is expected to maintain its momentum on the back of sustained profitability. Services activity is likely to grow above the pre-pandemic trend. 

Quarterly Growth Forecasts

“The prospects of fixed investment remain bright with business optimism, healthy corporate and bank balance sheets, robust government capital expenditure and signs of an upturn in the private capex cycle,” Das added.  Headwinds from geopolitical tensions, volatility in international financial markets, geoeconomic fragmentation, rising Red Sea disruptions, and extreme weather events, however, pose risks to the outlook. 

Taking all these factors into consideration, the apex bank pegged real GDP growth for 2024-25 in Q1 at 7.1 per cent, Q2 at 6.9 per cent, Q3 at 7.0 per cent, and Q4 at 7.0 per cent. 

What has changed?

As far as the full-year growth forecast is concerned, the RBI has kept it unchanged at 7 per cent. However, the downward revision has been made by the apex bank in Q1 of FY25 at 7.1 per cent, which was earlier projected to be at 7.2 per cent. Similarly, the RBI made an upward revision to the growth forecast in Q2 at 6.9 per cent from 6.8 per cent projected earlier. For Q3, the growth forecast is kept unchanged, and for Q4, the RBI has raised the GDP growth target to 7 per cent from the earlier projected GDP growth of 6.9 per cent.