The Reserve Bank of India’s (RBI) Monetary Policy Committee, led by Governor Shaktikanta Das, has projected a 7% growth rate for the Indian economy in the fiscal year 2024-25, as announced on Thursday. This forecast accompanies the decision to maintain the benchmark lending rates at 6.5% for the sixth consecutive time. The committee’s stance remains unchanged, with a focus on withdrawing accommodation to ensure inflation progressively aligns with the target while still supporting growth.
In its December meeting, the Monetary Policy Committee had previously forecasted the Indian economy’s growth rate for fiscal year 2023-24 at 7%. Specific growth rates for different quarters were outlined, with Q3FY24 and Q4FY24 GDP growth rates projected at 6.5% and 6.0% respectively. Furthermore, the real GDP growth rates for Q1FY25, Q2FY25, and Q3FY25 were forecasted at 6.7%, 6.5%, and 6.4% respectively. The Centre’s First Advance Estimate also predicted a 7.3% growth rate for the Indian economy in FY24, potentially marking the third consecutive year of growth at 7% or above.
India’s economy had expanded by 7.2% in FY23, retaining its status as the fastest-growing major economy in 2023. Despite global economic challenges and multiple central bank rate hikes since 2022, the Indian economy has remained resilient. This resilience is supported by robust consumer and government spending, a thriving services sector, and increased manufacturing activity. Prime Minister Narendra Modi’s government has boosted infrastructure spending, while foreign investment in India, particularly in technology manufacturing, has been on the rise as companies seek alternatives to China.
In the previous meeting, the MPC highlighted the domestic economic activity’s resilience, with real GDP growing by 7.6% year-on-year in Q2FY24. This growth was driven by strong investment and government consumption, offsetting the drag from net external demand. On the supply side, gross value added (GVA) rose by 7.4% in Q2, primarily fueled by buoyant manufacturing and construction activities.
