India's economy is still strong due to investment demand, steady urban consumption, and increasing rural consumption, according to RBI Governor Shaktikanta Das on Thursday (Aug 08). After considering all factors, the country's anticipated real GDP growth for 2024-25 is 7.2% with Q1 at 7.1%; Q2 at 7.2%; Q3 at 7.3%; and Q4 at 7.2%. The RBI chief stated that the projected real GDP growth for Q1:2025-26 is 7.2 per cent and leaves repo rate unchanged to ensure price stability with growth.
“After a weak and delayed start, the cumulative southwest monsoon rainfall has picked up with improving spatial spread. By August 7, 2024, it was 7 per cent above the long period average. This has supported kharif sowing, with total area sown as on August 2, being 2.9 per cent higher than a year ago. Industrial output registered an expansion of 5.9 per cent (year on year) in May 2024,” he explained.
The RBI Governor highlighted that the country's key sectors saw a 4.0 per cent increase in June, down from 6.4 per cent in May. Additional high frequency data released in June-July 2024 show growth in the services sector, continuing recovery in consumer spending, and indications of increased private investments. During the April-June period, the export of goods, the import of goods excluding oil and gold, and the trade of services all increased.
In the future, the Indian Meteorological Department's (IMD) forecast of higher than usual southwest monsoon and strong kharif agriculture season will help boost rural demand. The continuous growth in manufacturing and services indicates a consistent urban demand. Strong growth in steel consumption, high capacity utilization, strong balance sheets of banks and companies, and government's focus on infrastructure spending indicate a positive future outlook on investment activity. Das mentioned that enhancing global trade opportunities could help bolster international demand.
Nevertheless, Das also highlighted that risks to the outlook include geopolitical tensions, volatility in international commodity prices, and geo-economic fragmentation.
The Governor of the RBI stated that the worldwide economic forecast is stable despite a slight slowdown in speed. Inflation is decreasing in significant economies but service price inflation continues. Global prices of food, energy, and base metals have decreased since the previous policy meeting.
Central banks are taking different approaches to their policies due to different outlooks on economic growth and inflation. This is leading to instability in financial markets. He also mentioned that during the recent worldwide stock market declines, the dollar index has dropped, government bond yields have decreased significantly, and gold prices have surged to all-time highs.