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Informist, Thursday, Aug 8, 2024

 

--RBI Das: Domestic growth holding up well
--RBI Das: Sees FY25 GDP growth at 7.2% versus 7.2?rlier
--RBI Das: Apr-Jun GDP growth seen 7.1% vs 7.3?rlier
--RBI Das: Jul-Sep GDP growth seen 7.2% vs 7.2?rlier
--RBI Das: Oct-Dec GDP growth seen 7.3% vs 7.3?rlier
--RBI Das: Jan-Mar GDP growth seen 7.2% vs 7.2?rlier
--RBI Das: Apr-Jun FY26 real GDP growth seen 7.2%
--RBI Das: Cut Apr-Jun GDP growth outlook on lower corp profits
--RBI Das: Cut Apr-Jun GDP growth outlook on slower govt spend
--RBI Das: Risks to growth are evenly balanced
--RBI Das: Growth is resilient, inflation trending downwards
--RBI Das: Need to be watchful of inflation, growth trajectory
--RBI Das: India inflation-growth trajectory moving in balanced manner
--RBI Das: Ensuring price stability supports sustained growth
--RBI Das: High growth cannot be sustained without price stability
--RBI Das: Global econ growth stable but expansion uneven
--RBI Das: Near-term outlook on global growth looks positive
--RBI Das: Significant challenges to medium-term global growth
--RBI Das: Domestic econ activity continues to be resilient
--RBI Das: Good kharif sowing rise in reservoir levels bode well
--RBI Das: Steady southwest monsoon augurs well for kharif crop
--RBI Das: Mfg activity continues to gain ground on better local demand
--RBI Das: Services sector maintained buoyancy
--RBI Das: Svcs PMI indicates robust expansion in services
--RBI Das: Household consumption supporting turnaround in rural demand
--RBI Das: Sustained svcs activity to help urban consumption
--RBI Das: Visible signs of pickup in private investment
--RBI Das: Improved agri activity brightens rural consumption outlook
--RBI Das: Improved services activity aids urban consumption outlook

--RBI Das: Spillovers from geopolitics pose risk

--RBI Das: Improving global trade to aid external demand

--RBI Das: See good kharif output on La Nina forecast, reservoir levels

--RBI Das: Have enhanced resilience vs spillover from global shocks

--RBI Das: Premature to talk about recession in US

--RBI Das: Overall US econ growth doing well

--RBI Das: Need to see more data on US employment

--RBI Das: RBI will be watchful of all domestic, external data

--RBI Das: India has improved resilience against external shocks

 

NEW DELHI – The Reserve Bank of India today cut the country's GDP growth projection for Apr-Jun to 7.1% from 7.3% estimated in June. The central bank, however, retained its GDP growth projection for the current financial year that started in April at 7.2%.

 

The RBI's real GDP growth projection for the year is lower than that estimated by the finance ministry in its Economic Survey for 2023-24, which has given a range of 6.5% to 7.0%. The RBI kept its growth projection for the rest three quarters unchanged, with Jul-Sep at 7.2%, Oct-Dec at 7.3%, and Jan-Mar at 7.2%.

 

The RBI also gave a growth projection of 7.2% for Apr-Jun of the next fiscal year. The RBI, in its report released in April, had estimated a real GDP growth of 7% for 2025-26 (Apr-Mar).

 

The RBI has cut its projection for Apr-Jun on account of lower government spending, RBI Governor Shaktikanta Das said in his policy statement. "This is primarily due to updated information on certain high frequency indicators which show lower-than-anticipated corporate profitability, general government expenditure and core industries output," Das said. The National Statistical Office will release the GDP data for Apr-Jun on Aug 30.

 

The government's capital expenditure was slow in Apr-Jun, especially in April and May, due to the Model Code of Conduct imposed by the Election Commission in view of the Lok Sabha election that concluded on Jun 4. The capital expenditure was down 35% on year at 1.811 trln rupees in Apr-Jun.

 

The growth in the output of India's eight core industries fell to a 20-month low of 4.0% in June from 6.4% in May. For the quarter ended June, the output of the eight core industries rose 5.7%, compared with 6.0% last year.

 

"Domestic growth, however, is holding up well on the back of steady urban consumption and improving rural consumption, coupled with strong investment demand," Das said. "On the demand side, household consumption is supported by a turnaround in rural demand and steady discretionary spending in urban areas."

 

RURAL CONSUMPTION

Consumption demand, especially from rural households, is under prime focus this year after weak rural demand in 2023-24 dented consumption demand during the year. Consumption demand was at a three-year low of 4.0% in 2023-24, the lowest after the pandemic-hit year of 2020-21.

 

"Looking ahead, improved agricultural activity brightens the prospects of rural consumption," Das said. With the steady progress of the southwest monsoon and comfortable reservoir levels, the kharif output is expected to be good, Das said.

 

Since Jun 1, India has received 545.9 mm of rainfall, 7?ove the normal of 509.6 mm for the period, the India Meteorological Department said on Wednesday. As such, kharif crop sowing, at 90.5 mln ha as of Aug 2, is nearly 3% up on year, as per the latest data released by the farm ministry.  

 

"The likelihood of La Nina conditions developing during the second half of the monsoon season is likely to have a bearing on agricultural production in 2024-25," Das said. The IMD has also said that the El Nino conditions are likely to turn into neutral during the coming months, which will pave the way for La Nina, which brings good rainfall to India.

 

URBAN CONSUMPTION

Urban consumption demand is expected to be stable with sustained buoyancy in services activity, Das said. "Services sector maintained buoyancy as evidenced by the available high frequency indicators." The HSBC India services Purchasing Managers' Index, compiled by S&P Global, rose to 60.5 in June from a five-month low of 60.2 in May.

 

"Manufacturing activity continues to gain ground on the back of improving domestic demand," Das said. The manufacturing purchasing managers' index rose to 58.3 in June from 57.5 in May. 

 

However, the purchasing managers' index for both manufacturing and services eased to 58.1 and 60.3, respectively, in July.

 

"The healthy balance sheets of banks and corporates, thrust on capex by the government, and visible signs of pick-up in private investment would drive fixed investment activity," Das said.

 

GLOBAL GROWTH

While the domestic economic activity continues to be resilient, there are significant challenges to the medium-term global growth outlook, Das said. But the near-term global growth outlook is positive, Das added. 

 

"The spillovers from protracted geopolitical tensions, volatility in international financial markets and geoeconomic fragmentation, however, pose risks on the downside." The geopolitical stress emanates from the prolonged conflict in West Asia.

 

Global financial markets have also been volatile in the last three days due to fears of recession in the US because of a near three-year high unemployment rate of 4.3% in July. In the domestic market, both the Nifty 50 and BSE Sensex ended down 2.7?ch on Monday. This marked the highest single-day sell-off by foreign portfolio investors after the day of the General Election results on Jun 4.

 

The rupee has also ended at a record closing low against the dollar every day since Friday. At 1413 IST, the rupee was at 83.96 against the dollar.

 

"But if you look at the overall economic growth in the US, I think it is doing quite well," Das told the media in the post-policy press conference. "The second quarter growth numbers in the US were higher than the first quarter, and it was about 2.8%."

 

"Based on one month's data, you cannot rush to the conclusion about possibility of recession in the largest economy in the world," Das said. "At this point it would be premature to talk about recession in the US."

 

The improving prospects of global trade are expected to aid external demand, Das said. Global trade is also a prime point of focus this year after the growth fell to 1.2% in 2023. The World Trade Organization has projected a rebound in global trade with growth of 2.6% in 2024 and 3.3% in 2025.

 

"Global economic outlook exhibits steady though uneven expansion," Das said. But the risks are evenly balanced, Das added. 

 

FUTURE FOCUS

The monetary policy, by a majority of four out of six members, remains focused on withdrawal of accommodation to ensure that inflation progressively aligns to the target, while supporting growth. The committee kept the policy repo rate unchanged at 6.50?ter raising it by a cumulative 250 basis points since May 2022 to tame inflationary pressures. This is the ninth straight policy in which the committee has left the repo rate unchanged.

 

"The commitment of monetary policy to ensure price stability would strengthen the foundations for a sustained period of high growth," Das said. "India's growth remains strong, inflation is broadly on a declining trajectory."

 

"We will be watchful of all incoming data from the domestic as well as from external sources. And we will deal with all emerging situations," Das said. "Today, India has improved its resilience vis-a-vis external shocks quite a bit. India is far more resilient today than what it was earlier."  End

 

US$1 = 83.96 rupees

 

Reported by Krity Ambey

Edited by Namrata Rao and Ashish Shirke

 

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