RBI marginally raises FY24 GDP growth projection to 6.5 pc

Mumbai: The Reserve Bank on Thursday marginally raised India's economic growth projection for the current financial year to 6.5 per cent on back of higher Rabi crop output, moderating commodity prices, and the government's plan of higher capital expenditure.

The Reserve Bank of India (RBI) had earlier projected the gross domestic product (GDP) at 6.4 per cent.

India's GDP is expected to have recorded a growth of 7.0 per cent in 2022-23.

Announcing the first bi-monthly monetary policy of 2023-24, RBI Governor Shaktikanta Das said the higher Rabi production has brightened the prospects for agriculture sector and rural demand.

The steady growth in contact-intensive services should be positive for urban demand, he said, adding that the government's focus on capital expenditure, capacity utilisation above long-period average and moderating commodity prices should bolster manufacturing and investment activity.

"Taking all these factors into consideration, real GDP growth for 2023-24 is projected at 6.5 per cent, with Q1 at 7.8 per cent; Q2 at 6.2 per cent; Q3 at 6.1 per cent; and Q4 at 5.9 per cent. The risks are evenly balanced," he said.

Das, however, added the drag from net external demand may continue due to increased global headwinds. The protracted geopolitical tensions and global financial market volatility pose downside risks to the outlook.

Rabi foodgrains production is estimated to increase by 6.2 per cent in 2022-23.

PMI manufacturing remained robust at 56.4 in March, recording expansion for the 21st consecutive month due to favourable domestic demand.

Services sector activity exhibited buoyancy. PMI services remained in the expansion zone at 57.8 in March, driven by favourable demand conditions and new business gains.

The World Bank in its latest 'India Development Update' (IDU) has slashed the Gross Domestic Product (GDP) forecast to 6.3 per cent, against the earlier estimate of 6.6 per cent in 2023-24.

Asian Development Bank also expects India's economic growth to moderate to 6.4 per cent due to tight monetary conditions and elevated oil prices, as compared to 6.8 per cent expansion for the financial year ended March 2023.