Growth Outlook
RBI staff downgrade Jul-Sept GDP growth forecast to 6.8% from 7.0%
This story was originally published at 20:10 IST on 21 October 2024
Register to read our real-time news.Informist, Monday, Oct. 21, 2024
Please click here to read all liners published on this story
--RBI paper: Demand poised to shrug off temporary slowdown seen in Jul-Sept
--CONTEXT: Comments from RBI staff's monthly 'State of the Economy' article
--RBI paper:Possibility of excess rain damaging standing kharif crops a risk
--RBI paper: Economic Activity Index pegs Jul-Sept GDP growth at 6.8%
NEW DELHI – Reserve Bank of India staff have cut their forecast for India's GDP growth in Jul-Sept to 6.8%, keeping it 20 basis points below the central bank's official projection.
"Our economic activity index (EAI), based on a range of high-frequency indicators, projects GDP growth at 6.8% in Q2:2024-25 (Jul-Sept)," the RBI's monthly State of the Economy article - which includes Deputy Governor Michael Patra as one of its co-authors - said on Monday. The views expressed in the article do not reflect the central bank's official stance.
The September edition of the article had forecast GDP growth in the second quarter at 7.0%, 20 bps lower than the RBI's official projection of 7.2%. However, earlier this month on Oct. 9, the RBI lowered its growth projection for the quarter to 7.0%. India's GDP growth had slid to a five-quarter low of 6.7% in Apr-Jun, missing forecasts given by economists and the RBI. GDP data for Jul-Sept 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.
"In spite of recent geopolitical tensions, India's growth outlook is supported by robust domestic engines. Some high-frequency indicators have, however, shown a slackening of momentum in the second quarter of 2024-25, partly attributable to idiosyncratic factors like unusually heavy rains in August and September, and Pitru Paksha," the State of the Economy article said Monday. In 2024, Pitru Paksha stretched from Sept. 17 to Oct. 2. During this period, Hindus pay homage to their ancestors, especially through food offerings.
"In parallel, there are other high-frequency indicators which show steady growth. Consumption spending is shaping up for a festival season revival, especially in small towns and lower-tier cities. Despite high prices tempering some of the enthusiasm, many buyers are prioritising discounts," the article added.
The article's assessment of growth matches that of Governor Shaktikanta Das, who had said in the post-policy press conference on Oct. 9 that while some indicators may show growth is slowing down, "there are areas where the economic growth will be faster. It's a mixed bag at all times. We have to get the overwhelming sense".
However, data released after the RBI policy has added to the slew of weak numbers, with merchandise exports rising just 0.5% in September and industrial production contracting by 0.1% in August--the worst performance in 22 months. Before the policy, where the Monetary Policy Committee left the repo rate unchanged at 6.50% but shifted to a neutral stance, core sector growth had hit a 42-month low of (-)1.8% in August and manufacturing and services Purchasing Managers' Index readings for September had declined to multi-month lows.
Commenting further on the domestic growth developments, the RBI staff article said demand is "poised to shrug off the temporary slowdown in momentum in the second quarter of 2024-25 as festival demand picks up pace and consumer confidence improves", with private investment seen rising "in response to signs of pick-up in consumption demand and rising business optimism".
The article also voiced some concerns about the agricultural output, saying the possibility of excessive rainfall damaging standing kharif crops remains a risk. End
Reported by Siddharth Upasani
Edited by Saji George Titus
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (11) 4220-1000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2024. All rights reserved.
To read more please subscribe
Share this Story:
