“Taking these types of elements under consideration, the true GDP enlargement for 2022-23 is projected at 6.8%, with Q3 at 4.4% and This autumn at 4.2%, with dangers calmly balanced. Real GDP enlargement is projected at 7.1% for Q1FY24 and at 5.9% for Q2,” the RBI said in its monetary policy statement. It had earlier estimated the economy to grow at 7%.
Several multilateral agencies, investment banks and economists have cut India’s GDP growth forecast for the current financial year due to the impact of the slowing global growth triggered by geopolitical tensions. The government expects growth in 2022-23 at closer to 7%.
On growth, the monetary policy committee’s statement said the agricultural outlook has brightened, with prospects of a good rabi harvest. The sustained rebound in contact-intensive sectors is supporting urban consumption. Robust and broad-based credit growth and government’s thrust on capital spending and infrastructure should bolster investment activity. According to the RBI’s survey, consumer confidence is improving.
It said that assuming an average crude oil price (Indian basket) of $100 per barrel, inflation is projected at 6.7% in 2022-23, with Q3 at 6.6% and Q4 at 5.9%, and risks evenly balanced. CPI (consumer price index) inflation for Q1FY24 is projected at 5% and for Q2 at 5. 4% on the assumption of a normal monsoon.
RBI deputy governor Michael Patra reiterated the governor’s statement that the battle against inflation is far from over. “So, we remain on guard. , , far from neutral until we see a durable decline in inflation and it is staying within the tolerance band. The moderation of rate hikes from a continuous 50bps increase tells you for the shift in the wind. We feel that the worst of inflation is over but the moderation of inflation will be very grudging and very uneven. So, we must shepherd inflation first firmly into the tolerance band and then to the target. ,
“The inflation trajectory going ahead would be shaped by both global and domestic factors. In case of food, while vegetable prices are likely to see seasonal winter correction, prices of cereals and spices may remain elevated in the near term on supply concerns,” the MPC observation stated.