RBI projects 7.2% GDP growth for India in 2024-25, citing strong consumption

The Reserve Bank of India's ( RBI ) October Bulletin has reaffirmed India's economic resilience, projecting a real GDP growth rate of 7.2 per cent for the fiscal year 2024-25. The bulletin, which emphasises robust consumption and investment demand, forecasts growth rates of 7 per cent in Q2 and 7.4 per cent for both Q3 and Q4. Authored by a committee led by Deputy Governor Michael Debabrata Patra, the report highlights that private consumption is being driven by improved rural demand and a positive agricultural outlook. Urban demand is expected to remain strong, particularly in the services sector.

The RBI Bulletin attributes India's growth momentum to several factors, including the government’s focus on capital expenditure and the health of corporate and banking sectors, which are expected to further stimulate investment activities.
In the first quarter of FY 2024-25, the economy expanded by 6.7per cent, primarily due to a resurgence in private consumption and a notable increase in investment, reaching its highest GDP share since 2012-13. The Gross Value Added (GVA) increased by 6.8per cent, with significant contributions from the industrial and services sectors.

Looking ahead, the RBI anticipates sustained agricultural growth due to favourable weather and improved Kharif sowing. The manufacturing sector is also expected to thrive, aided by lower input costs and supportive government policies. High-frequency indicators, such as the Purchasing Managers' Index (PMI) for manufacturing and services, show robust expansion, indicating strong momentum in both rural and urban demand.

On inflation, the bulletin reported a decrease in headline inflation to 3.6 per cent in July and 3.7 per cent in August. However, it warned of a potential uptick in September due to base effects and rising food prices. The RBI projects Consumer Price Index (CPI) inflation for 2024-25 at 4.5 per cent, with an expectation that food inflation will stabilise by the fiscal year's end. For FY 2025-26, the RBI forecasts GDP growth at 7.1 per cent, with Q1 projected at 7.3 per cent, assuming favourable weather conditions and stability in external factors. The bulletin noted that risks to both growth and inflation appear balanced, suggesting a cautiously optimistic outlook for the Indian economy.