RBI MPC meeting: India’s FY25 GDP forecast raised to 7.2% from 7%


The Reserve Bank of India’s rate-setting panel on Friday raised India’s FY25 real GDP forecast to 7.20 per cent from 7 per cent earlier on prospects of improving rural and urban demand conditions buoyed by monsoon forecast, Governor Shaktikanta Das said.The central bank upgraded its quarterly forecast for growth as well, with Q1, Q2, Q3 and Q4 now expected to grow at 7.3 per cent, 7.2 per cent, 7.3 per cent and 7.2 per cent respectively.

The MPC at its April meeting, while warning of geopolitical headwinds, projected India’s GDP to grow at 7 per cent in the ongoing financial year. India’s economy would grow at 7.1 per cent, 6.9 per cent, 7 per cent and 7 per cent in each quarter of FY25.

With a 4:2 majority, the Monetary Policy Committee voted to leave the benchmark lending rate unchanged at 6.25 per cent.

“Domestic economic activity has maintained resilience,” RBI Governor Das said while announcing the policy decisions.


“During 2024-25, so far the domestic economic activity has maintained resilience. Manufacturing activity continues to gain ground on the back of strengthening domestic demand. The 8 core industries posted healthy growth in April 2024. Purchasing Managers Index, that is PMI in manufacturing continued to exhibit strength in May 2024 and it is indeed the highest globally,” Das said.

“The services sector maintained buoyancy as evident from available high-frequency indicators. PMI services stood strong at 60.2 in May 2024, indicating continued and robust expansion in activity,” he added.

Indian economy in FY24

Having grown 7.8 per cent in the final quarter of the previous financial year, the Indian economy likely grew at 8.2 per cent in FY24, government data released last week showed. In FY23, India had registered a growth rate of 7 per cent.India has now managed to grow at 7 per cent or above for the third consecutive year. If RBI’s Friday forecast for FY25 materialises, it would be the fourth year of 7 per cent or above growth for the Indian economy.

“The Q4 GDP growth data for 2023-24 shows robust momentum in our economy which is poised to further accelerate. Thanks to the hardworking people of our country, 8.2 per cent growth for the year 2023-24 exemplifies that India continues to be the fastest growing major economy globally,” Prime Minister Narendra Modi posted on social media.

The GDP data came four days before PM Modi’s Bharatiya Janata Party-led NDA was voted back to power in the Lok Sabha with a 293 seat majority. While BJP has emerged as the single largest party in the lower house of the Parliament, it has done so 43 seats short of a majority, pushing India back into coalition era after 10 years.

A relatively weaker mandate for PM Modi spurred worries of more threats to India’s fiscal discipline and thereby growth prospects.

Deutsche Bank in a note said that the Indian economy has exhibited “remarkable resilience” despite higher rates for longer, the Russia-Ukraine war and Covid prior to that, though a strong pickup in real GDP growth during FY24 can be also attributed materially to a very low GDP deflator.

The report highlighted that nominal GDP growth decelerated to 9.6% in FY24, down from 14.2% in FY23 and 19% in FY22. However, real GDP growth increased to 8.2% in FY24 from 7% in FY23. This acceleration was driven by a significant drop in the GDP deflator to 1.4% in FY24, compared to 7.6% in FY23 and 9.4% in FY22.

Deutsche Bank also advised caution on reading the headline GDP numbers, pointing out that while the real GDP grew 8.2 per cent, real GVA (gross value added) growth was 1 percentage point lower at 7.2 per cent.

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