Growth Forecast
RBI staff see Jul-Sep growth at 7.0%, 20 bps below official forecast
This story was originally published at 19:48 IST on 20 September 2024
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--RBI paper: Econ activity index projects 7.0% Jul-Sep GDP growth
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--RBI paper: In-house model projects FY25 GDP growth of 7.3%
--RBI paper: In-house model projects FY26 GDP growth of 6.7%
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--RBI paper: Household consumption to rise as rural demand reviving
--RBI paper:Household consumption to grow faster Jul-Sep as CPI eases
NEW DELHI – India's GDP is expected to grow by 7.0% in the second quarter of 2024-25 (Apr-Mar), according to the economic activity index of Reserve Bank of India staff. The forecast is 20 basis points lower than the central bank's official projection of 7.2% for Jul-Sep, as given in the Monetary Policy Committee's statement in August.
"Our economic activity index (EAI), based on a range of high frequency indicators, projects GDP growth at 7.0% in Q2:2024-25 (Jul-Sep) on the back of a ticking up of momentum relative to the preceding quarter," the RBI's regular State of the Economy article - which includes Deputy Governor Michael Patra as one of its co-authors - said today. The views expressed in the article do not reflect the central bank's official stance.
India's GDP growth slid to a five-quarter low of 6.7% in Apr-Jun, data released in August showed, missing forecasts given by economists and the RBI. GDP data for Jul-Sep is scheduled to be released on Nov 29.
RBI staff's economic activity index looks at 27 monthly indicators representing industry, services, global, and miscellaneous activities to arrive at its estimate. The August edition of the State of the Economy article pegged Jul-Sep GDP growth at 7.2%.
Commenting on the latest growth print, the staff article said "more needs to be read into the slowing of India's GDP in Q1:2024-25 than just disappointment" as domestic drivers of activity were robust. "Gross value added (GVA) growth actually rose sequentially in Q1, but the increase in subsidies...offset the gains from showing up in GDP growth," the article said, echoing recent comments by RBI Governor Shaktikanta Das. Speaking at the FIBAC banking conference earlier this month, Das said RBI's 2024-25 growth forecast of 7.2% remains achievable despite the weaker-than-expected first quarter data.
In the current quarter, RBI economists expect household consumption to grow at a faster clip thanks to a decline in inflation, with support seen coming from reviving rural demand, increased hiring by e-commerce firms ahead of the festival season as well as logistics companies to help meet higher transportation, warehousing, and delivery activities.
Beyond the second quarter, the RBI's internal model sees GDP growth at 8.4% in Oct-Dec, sharply higher than the central bank's official forecast of 7.3%. The quarterly breakdown of the forecasts are as follows:
| PERIOD | OFFICIAL RBI FORECAST | RBI STAFF ESTIMATES |
| Jul-Sep | 7.2% | 7.0% |
| Oct-Dec | 7.3% | 8.4% |
| Jan-Mar | 7.2% | 6.6% |
| 2024-25 | 7.2% | 7.3% |
| Apr-Jun | 7.2% | 8.0% |
| Jul-Sep 2025 | -- | 6.4% |
| Oct-Dec 2025 | -- | 6.4% |
| Jan-Mar 2026 | -- | 6.2% |
| 2025-26 | -- | 6.7% |
End
Reported by Siddharth Upasani
Edited by Aditya Sakorkar
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