RBI Projects India’s Economic Growth and Inflation for FY25
Key Highlights from the Monetary Policy Committee Meeting
The Reserve Bank of India (RBI) has forecasted India’s real GDP growth for the fiscal year 2024-25 at 7.2%, with inflation expected to moderate to 4.5%. RBI Governor Shaktikanta Das announced these projections following the Monetary Policy Committee (MPC) meeting.
Quarterly Growth Projections
Das detailed the quarterly growth rates, with Q2 at 7%, Q3 and Q4 both at 7.4%, and Q1 of the next financial year (2025-26) projected at 7.3%. He emphasized that the growth will be supported by strong quarterly performances.
Inflation and Agricultural Concerns
Inflation in the third quarter is expected to be slightly higher at 4.8%, but a decrease is anticipated in the fourth quarter with the kharif harvest. However, agricultural output remains vulnerable to weather-related shocks, which could affect inflation trends.
First Quarter Performance
In the first quarter of FY25, India’s GDP grew by 6.7%, driven by a revival in private consumption and increased investment. The investment share in GDP reached its highest since 2012-2013, although government expenditure contracted.
Sectoral Growth and Economic Indicators
On the supply side, gross value added (GVA) grew by 6.8%, surpassing GDP growth, supported by strong industrial and services sectors. High-frequency indicators suggest steady domestic economic activity.
Liquidity and Economic Confidence
Surplus liquidity conditions were observed in August, September, and early October, though levels shifted back in late September. The agriculture and services sectors remained robust, and private investment intentions are improving, indicating growing economic confidence.
Inflation Outlook
While headline inflation is on a downward trend, its pace is slow and uneven. Das noted that food inflation pressures might ease later in the financial year due to strong kharif sowing and good soil moisture conditions.
Focus on Inflation
Das highlighted that resilient growth allows the RBI to focus on reducing inflation to the 4% target. The MPC will remain vigilant of the evolving economic outlook in the coming months.
Doubts Revealed
RBI -: RBI stands for the Reserve Bank of India. It is the central bank of India, which means it manages the country’s money and financial system.
Shaktikanta Das -: Shaktikanta Das is the Governor of the Reserve Bank of India. He is responsible for making important decisions about India’s money and economy.
GDP -: GDP stands for Gross Domestic Product. It is the total value of all goods and services produced in a country in a year. It helps us understand how well a country’s economy is doing.
FY25 -: FY25 means the financial year 2025. In India, a financial year starts on April 1st and ends on March 31st of the next year.
Inflation -: Inflation is when the prices of goods and services go up over time. It means you need more money to buy the same things as before.
Private consumption -: Private consumption is the amount of money people spend on goods and services for themselves, like food, clothes, and entertainment.
Investment -: Investment is when people or companies put money into something, like a business or project, hoping it will grow and make more money in the future.
Weather shocks -: Weather shocks are unexpected changes in weather, like floods or droughts, that can affect things like farming and food production.