Reserve Bank of India (RBI) Governor Shaktikanta Das affirmed a 7.2% GDP growth forecast for this fiscal year, though he also noted a marginal slowdown in the second half due to rising central subsidies. He emphasized that “the positives outweigh the negatives when it comes to key growth indicators.” However, inflation continues to pose a challenge.
Key Factors Affecting Economic Activity
The Indian economy grew at an impressive rate of 8.2% in FY24, but the first quarter of the current fiscal year saw a decline to 6.7% due to a reduction in government capital expenditure before the general elections and increased subsidies from states. Economists predict further dips while forecasting a 6.5% GDP growth rate for the September quarter.
Das highlighted that the economic signals are mixed but stressed that “the underlying economic activity remains strong,” citing a rebound in car sales in October. Although urban FMCG sales showed some weakness. The policy rate, held at 6.5% by the RBI’s Monetary Policy Committee (MPC) has remained steady for the past ten reviews and while the stance has shifted to neutral, no immediate rate cuts are expected.
Inflation Risks
The Indian rupee recently reached a record low of 84.2950 against the dollar.Analysts expect the Reserve Bank of India to continue intervening to curb excessive volatility. Indian stock indices Sensex and Nifty also saw declines. Upcoming U.S. Federal Reserve policy announcements may further influence market directions.
Inputs by Agencies
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