New Delhi: Amidst concerns over geo political scenario, the Reserve Bank of India (RBI) on Wednesday asserted that India’s growth story remains “intact” as its fundamentals drivers – consumption and investment demand – are gaining momentum.
Prospects of private consumption, the mainstay of aggregate demand, look bright on the back of improved agricultural outlook and rural demand. Sustained buoyancy in services would also support urban demand, RBI Governor Shaktikanta Das said while announcing the Monetary Policy.
Real gross domestic product (GDP) grew by 6.7 per cent in Q1 of 2024-25, led by a revival in private consumption and improvement in investment. The share of investment in GDP reached its highest since 2012-13, he said adding Government expenditure, on the other hand, contracted during the quarter.
On the supply side, gross value added (GVA) expanded by 6.8 per cent surpassing GDP growth, aided by strong industrial and services sector activities.
Taking all these factors into consideration, real GDP growth for 2024-25 is projected at 7.2 per cent, with Q2 at 7.0 per cent; Q3 at 7.4 per cent; and Q4 at 7.4 per cent. Real GDP growth for Q1:2025-26 is projected at 7.3 per cent. The risks are evenly balanced.
High frequency indicators available so far suggest that domestic economic activity continues to be steady. The main components from the supply side – agriculture, manufacturing and services – remain resilient. Agricultural growth has been supported by above normal south-west monsoon rainfall and better kharif sowing.
The global economy has remained resilient since the last meeting of the MPC, although downside risks from increasingly intense geopolitical conflicts, geo-economic fragmentation, financial market volatility and elevated public debt continue to play out, Das said.
Manufacturing is showing signs of slowdown, while services activity is holding up. World trade is exhibiting improvement. Inflation is softening, supported by lower energy prices. Growing divergence in inflation-growth dynamics across countries has resulted in varying monetary policy responses.
Looking ahead, India’s growth story remains intact, he said. Sustained buoyancy in services would also support urban demand. Government expenditure of the centre and the states is expected to pick up pace in line with the Budget Estimates. Investment activity would benefit from consumer and business optimism, government’s continued thrust on capex and healthy balance sheets of banks and corporates.
