Mumbai: Exuding confidence that the Indian economy is likely to grow at 7.2 per cent in 2024-25, the Reserve Bank of India (RBI) Friday said all sectors – agriculture, buoyancy in services sector, health, banks and business optimism, augur well for overall economic activity.
“Looking ahead, the forecast of above normal south-west monsoon by the India Meteorological Department (IMD) is expected to boost kharif production and replenish the reservoir levels. Strengthening agricultural sector activity is expected to boost rural consumption. On the other hand, sustained buoyancy in services activity should continue to support urban consumption,” RBI Governor Shaktikanta Das said said while announcing the second bi-monthly monetary policy of the current fiscal 2024-25.
He also stated that the healthy balance sheets of banks and corporates, government’s continued thrust on capex, high capacity utilization, and business optimism augur well for investment activity. External demand should get a fillip from improving prospects of global trade.
“Taking all these factors into consideration, real GDP growth for 2024-25 is projected at 7.2 per cent with Q1 at 7.3 per cent; Q2 at 7.2 per cent; Q3 at 7.3 per cent; and Q4 at 7.2 per cent. The risks are evenly balanced,” Das said.
Equally important is good health of the global economyc and in this regard, he said global growth is sustaining its momentum in 2024 and is likely to remain resilient, supported by rebound in global trade. Inflation is easing, but the final leg of this disinflation journey may be tough.
Central banks remain steadfast and data-dependent in their fight against inflation. Market expectations regarding the timing and pace of interest rate cuts are also changing with incoming data and central bank communication.
US dollar and sovereign bond yields remain range bound. While gold prices have surged on safe haven demand, equity markets have gained in both advanced and emerging market economies since the last MPC meeting.
On the inflation front, Das said the Consumer Price Index (CPI) headline inflation softened during March-April, though persisting food inflation pressures offset the gains of disinflation in core and deflation in the fuel groups.
Despite some moderation, pulses and vegetables inflation remained firmly in double digits. Vegetable prices are experiencing a summer uptick following a shallow winter season correction.The deflationary trend in fuel was driven primarily by the LPG price cuts in early March. Core inflation softened for the 11th consecutive month since June 2023. Services inflation moderated to a historic low and goods inflation remained contained.
On the other hand, the forecast of above normal monsoon bodes well for the kharif season. Wheat procurement has surpassed last year’s level. The buffer stocks of wheat and rice are well above the norms. These developments could bring respite to food inflation pressures, particularly in cereals and pulses. The outlook on crude oil prices remains uncertain due to geo-political tensions.
Assuming a normal monsoon, CPI inflation for 2024-25 is projected at 4.5 per cent with Q1 at 4.9 per cent; Q2 at 3.8 per cent; Q3 at 4.6 per cent; and Q4 at 4.5 per cent, the Governor stated.
