RBI Holds Steady at 6.5% GDP Outlook for FY24, Tweaks Inflation Projection Upwards
- ByStartupStory | August 10, 2023
The Reserve Bank of India (RBI) has decided to retain the GDP growth projection for the current fiscal year at 6.5%, while making a minor adjustment to the inflation projection, which has been marginally raised to 5.4%. The upward revision in inflation is attributed to the rise in vegetable prices, particularly tomatoes.
In the announcement of the bi-monthly monetary policy, RBI Governor Shaktikanta Das emphasised the resilience of domestic economic activity. He pointed out positive indicators such as the recovery in kharif sowing and rural incomes, as well as the buoyancy in services and consumer confidence, which are expected to bolster household consumption.
“Headwinds from weak global demand, volatility in global financial markets, geopolitical tensions and geoeconomic fragmentation, however, pose risks to the outlook,” Das said.
Factoring in these considerations, the projection for real GDP growth for the fiscal year 2023-24 stands at 6.5%, with the first quarter estimated at 8% and the fourth quarter at 5.7%. Additionally, the real GDP growth for the first quarter of the following fiscal year, 2024-25, is forecasted to be 6.6%.
Discussing inflation, Governor Das highlighted the notable increase in vegetable prices, primarily driven by tomatoes, which is anticipated to exert upward pressure on near-term headline inflation. However, he reassured that this spike is likely to subside with the influx of fresh produce into the market. He also mentioned the positive development of improved monsoon progress and kharif sowing in July.
Nevertheless, Das commented “This jump is, however, likely to correct with fresh market arrivals,” he said, and added there has been significant improvement in the progress of the monsoon and kharif sowing in July.
Breaking down the CPI projections, the second quarter is estimated at 6.2%, the third quarter at 5.7%, and the fourth quarter at 5.2%, with risks being evenly balanced. Looking ahead, the retail inflation for the first quarter of the subsequent fiscal year, 2024-25, is predicted to be 5.2%.
The headline CPI inflation showed an increase from 4.3% in May to 4.8% in June. This uptick was largely driven by dynamics within the food group, particularly the higher prices of vegetables, eggs, meat, fish, cereals, pulses, and spices.
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