Source: Economic Times, 10 August 2023
The Indian economy is likely to grow at 6.5 per cent in the financial year 2023-24, said Reserve Bank of India (RBI) Governor Shaktikanta Das on Thursday while announcing the MPC's decision to leave lending rates unchanged.
The MPC has left its projections made in the June meeting unchanged.
At its previous meeting, the MPC had projected real GDP growth for the entire fiscal at 6.5 per cent with Q1 at 8.0 per cent, Q2 at 6.5 per cent, Q3 at 6.0 per cent, and Q4 at 5.7 per cent.
India’s economy grew by a higher-than-expected 6.1% in the March quarter, with India seeing a 7.2 per cent growth in FY23.
Governor Das then noted that a higher rabi crop production in the previous financial year, in addition to an expected normal monsoon, and a sustained buoyancy in services should support private consumption and overall economic activity in the country.
However, Das maintained that weak external demand, geoeconomic fragmentation, and protracted geopolitical tensions, pose risks to the panel’s outlook.
Analysts have noted that robust reading in India’s high-frequency indicators, including services PMI and tax collections is likely to give the central bank some room to focus on fighting inflation and giving adequate priority to maintaining India’s growth rate.
India, still a bright spot?
The International Monetary Fund (IMF) recently raised India’s growth forecast for FY24 to 6.1 per cent from 5.9 per cent, citing strong domestic investment. However, it also cautioned that the global economy is not “out of the woods” yet and that the world’s battle against inflation is far from over.
It may be noted that IMF’s projection for FY24 is still lower than that of RBI’s.
Echoing a similar worry, MPC’s Jayanth Varma in the previous meeting noted India still sees significant risks to both inflation and growth, and the process of bringing inflation under control is still very much a work in progress.
Economists are concerned about global activity losing its momentum owing to monetary tightening, slowing recovery in China and high core inflation.