The Reserve Bank of India has revised its gross domestic product growth projections for the current fiscal year, raising it to 7.2 percent from the previous projection of 7 percent. The revision comes on the back of the pickup in private consumption and the resuscitation of rural demand.
Unveiling the bi-monthly monetary policy, RBI Governor Shaktikanta Das projected India's real GDP growth at 8.2 percent in fiscal year 2023-24.
Governor Das also pointed out that sustained resilience of domestic economic activity continued through the year so far. Manufacturing activity has risen along with invigorating domestic demand. The services sector has remained buoyant, by all accounts, he said, based on several high-frequency indicators.
With a question on whether the economy is on the path of overheating, RBI Deputy Governor Michael Debabrata Patra said there were no indications of overheating. He said this high growth was necessary to catch up to the output levels that fell during the pandemic.
Further, Governor Das highlighted the recovery in private consumption, which is now being led by urban areas and remains the key driver of aggregate demand. Rural demand is also on the upswing and should be strengthened by rising farm income. Investment activity is also on the rise, which is being fueled by the expansion in non-food bank credit.
He also pointed out that there was an above-normal south-west monsoon forecast by the India Meteorological Department, which will help in improving kharif production and aid in the filling up of reservoirs.
Looking forward, the RBI expects real GDP growth in 2024-25 to be 7.2 per cent, with evenly balanced risks across quarters. Healthy balance sheets of banks and corporates, government's focus on capital expenditure, high capacity utilisation, and business optimism is likely to support investment activity. In such a scenario, the RBI also expects external demand to pick up with the prospects of global trade.
Governor Das noted that RBI's monetary policy decisions, though keeping an eye on the pattern of global economic trends, are primarily guided by the condition of domestic growth and inflation. He brushed off the prospect of blindly following the Federal Reserve's policy, as the RBI decisions are said to be guided by local economic conditions.
In short, the RBI continues to look at an economy that sustains its growth from the drivers of robust domestic demand, favorable monsoon predictions, and a strong possibility of global trade recovering, keeping a watchful eye over inflationary pressures and global economic dynamics.
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