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Informist, Wednesday, Oct. 9, 2024

 

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--RBI Das: Retains FY25 GDP growth forecast at 7.2%
--RBI Das: Revises Jul-Sept GDP growth forecast to 7.0% from 7.2?rlier
--RBI Das: Revises Oct-Dec GDP growth forecast to 7.4% from 7.3?rlier
--RBI Das: Revises Jan-Mar GDP growth forecast to 7.4% from 7.2?rlier
--RBI Das: FY26 Apr-Jun GDP growth forecast pegged at 7.3%
--RBI Das: Risks to growth evenly balanced
--RBI Das: India's growth story remains intact
--RBI Das: Domestic growth has sustained momentum
--RBI Das: Resilient growth gives us space to focus on inflation
--RBI Das: MPC decided to remain watchful given prevailing circumstances
--RBI Das: Manufacturing sector showing signs of slowdown, services activity holding up
--RBI Das: Fall in core sector output in August due to high base
--RBI Das: Data suggests domestic economic activity continues to be resilient
--RBI Das: Services sector continues to grow at a strong pace
--RBI Das: Services exports supporting overall export growth
--RBI Das: Investment activity remains buoyant
--RBI Das: Share of investment in GDP has reached highest level since FY13
--RBI Das: Govt investment increasing, private investment gaining steam
--RBI Das: Govt spending expected to pick up pace in line with Budget estimates
--RBI Das: Prospects of private consumption look bright on robust farm output
--RBI Das: Rural demand trending upwards, urban demand holding firm
--RBI Das: Buoyancy in services to support urban demand
--RBI Das: Consumption, investment demand gaining momentum
--RBI Das: Sustained buoyancy in services to also boost urban demand
--RBI Das: Agriculture growth supported by above normal monsoons
--RBI Report: See FY26 Jan-Mar GDP growth at 7.0% 
--RBI Report: See FY26 Oct-Dec GDP growth at 7.0% 
--RBI Report: See FY26 Jul-Sept GDP growth at 7.2% 
--RBI Report: See FY26 Apr-Jun GDP growth at 7.3% 
--RBI Report: See quarterly GDP growth rates in 7.0-7.3% range FY26 
--RBI Report: See FY26 GDP growth at 7.1% 
--RBI Das: Growth holding firm since Feb 2023 despite high interest rates 
--RBI Das: Don't see any evidence of higher rates impinging on growth 
--RBI Das: India's PMI numbers still very much in expansion zone 
--RBI Das: Manufacturing, services PMI still at elevated levels 
--RBI Das: Economic activity in individual sectors always a mixed bag 
--RBI Das:Sans effect of subsidies, Apr-Jun GDP growth would've been over 7% 
--RBI Das: Apr-Jun GDP below 7% due to high subsidies 
--RBI Das: Both state, Centre's spending to be in line with Budget aim 
--RBI Das: Rural demand expected to retain momentum 
--RBI Das: Expectation of good rabi output fairly strong 
--RBI Das: Monsoon has been good, expectation of good rabi crop also strong 
--RBI Das: Pvt investment showing signs of pickup 
--RBI Das: Govt capex, services sector also doing well 
--RBI Das: Critical drivers of growth quite stable 
--RBI Das: Private, govt capex doing well
 

 

NEW DELHI – The Reserve Bank of India Wednesday retained its GDP growth forecast for 2024-25 (Apr-Mar) at 7.2%, but cut its projection for Jul-Sept to 7% from an earlier estimate of 7.2%. The retention of the growth forecast for the current financial year comes after data released in August showed India's GDP growth fell to a five-quarter low of 6.7% in Apr-Jun, 40 basis points lower than the RBI's projection of 7.1%.

 

"Looking ahead, India's growth story remains intact as its fundamental drivers – consumption and investment demand – are gaining momentum," RBI Governor Shaktikanta Das said at the conclusion of the Monetary Policy Committee's three-day meeting. At the meeting, the MPC decided to keep the repo rate unchanged at 6.50%, but changed its stance to "neutral" from "withdrawal of accommodation".

 

The quarterly break-up of the central bank's latest growth forecasts is as follows: 7.4% for Oct-Dec and 7.4% for Jan-Mar. It had previously estimated growth in the last two quarters of FY25 to be 7.3% and 7.2%, respectively.

 

In its Monthly Economic Review report for August, released on Sept. 26, the finance ministry had retained the FY24 Economic Survey's growth forecast of 6.5-7.0%.

 

For the first quarter of FY26, GDP growth is now seen at 7.3%, up from 7.2% projected in August, Das said in his statement. The Indian central bank then sees growth moderating to 7.2% in Jul-Sept 2025, and 7% for both Oct-Dec and Jan-Mar of the next fiscal year, the RBI said in its monetary policy report. "For 2025-26, assuming a normal monsoon and no major exogenous or policy shocks, structural model estimates indicate real GDP growth at 7.1%."

 

Ahead of the policy decision, economists were speculating that the central bank may lower its view on growth for this year by 10-20 basis points in light of the lower-than-expected growth in Apr-Jun as well as recent high-frequency data that seem to suggest activity levels have softened, with core sector growth crashing to a 42-month low of (-)1.8% in August, Manufacturing And Services Purchasing Managers’ Indices both hitting multi-month lows in September, and Goods and Services Tax collections last month posting the weakest growth since June 2021, among others.  

 

Das, on the other hand, said that the high frequency indicators available so far suggest that domestic economic activity continues to be steady. The core sector output fell in August on account of an unfavourable base effect, Das added. The GDP growth in Apr-Jun was led by a revival in private consumption and improvement in investment, with the share of investment in GDP at the highest since 2012-13, Das said. The government expenditure, which contracted during the first quarter, is expected to pick up pace to be in line with the budget estimates.

 

The government's capital expenditure has been slow this year due to the Model Code of Conduct, which was in force in April and May due to the Lok Sabha election. According to data from the Controller General of Accounts, the capital expenditure in Apr-Aug was INR 3.00 trillion, down 19.5% from INR 3.74 trillion in the corresponding period of last year. The government needs to spend INR 8.10 trillion towards creating capital during Sept-Mar to meet the Budget target of INR 11.11 trillion, as per the latest available data.

 

At the post-policy press conference, Das also mentioned that the high subsidy payout by the state governments as well as the Central government during Apr-Jun led to a lower than 7% growth. The Centre had spent INR 901.74 billion on major subsidies during Apr-Jun, up 24% from last year.

 

"We just have first quarter data (for growth). Our sense is that growth is maintaining momentum," Das said, pointing out that India's HSBC Purchasing Managers' Index for the manufacturing sector as well as the services sector are in an expansionary zone, at elevated levels.

 

While the manufacturing activity is showing signs of slowdown globally, domestically, it is gaining steam, thanks to robust demand, lower input costs and a supportive policy environment, Das said. "The rural demand is trending upwards while urban demand continues to hold firm." Consumption demand, especially from rural households, is under prime focus this year after weak rural demand in FY24 dented consumption demand during the year. Consumption demand was at a three-year low of 4.0% in FY24, the lowest after the pandemic-hit FY21.

 

"Prospects of private consumption, the mainstay of aggregate demand, look bright on the back of improved agricultural outlook and rural demand," Das said. The agricultural growth has been supported by above normal south-west monsoon rainfall and better kharif sowing this year, Das said.

 

With monsoon 5% above normal, and higher kharif acreage, India's farm sector output grew 2% in Apr-Jun against 3.7% during the same period a year ago. "But agriculture is going to provide a big boost this time not only on the supply-side but also to consumption demand in the rural sector," Das said, adding that there are fairly strong expectations of good rabi crop output. 

 

The services sector, domestically as well as globally, is holding up, Das said. The sustained buoyancy in the sector is going to support urban demand, Das added. "On the external front, services exports are supporting overall growth."

 

The economic activity of individuals is always a mixed bag but all the critical drivers of growth are stable and resilient, Das said. "The domestic growth has maintained momentum. The risks are evenly balanced." Thanks to resilient domestic growth, the RBI has space to focus better on keeping inflation in control, Das said. "Don't see any evidence of higher rates impinging on growth."

 

Growth has been holding up since February 2023 even with a high interest rate, Das said. The RBI hiked the repo rate from May 2022 to February 2023, and has since maintained it at 6.5%.  End

 

Reported by Krity Ambey

Edited by Deepshikha Bhardwaj and Ashish Shirke

 

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