The Reserve Bank of India (RBI), in its annual report has projected a robust growth trajectory for the Indian economy, with predicted rise by 7% for the current fiscal year starting April 2024.
RBI’s annual report is a statutory report of the central board of directors, which covers the working and functions of the central bank for the April 2023-March 2024 period.
Growth of Indian Economy
In its annual report released on May 30, the RBI highlighted the impressive expansion of the Indian economy in the fiscal year 2023-24, with real GDP growth accelerating to 7.6% from 7.0% in the previous year. This marks the third consecutive year of growth rates at or above 7%, underscoring the economy's resilience against global economic headwinds and subdued global activity.
This positions India as the fastest-growing major economy globally, driven by strong macroeconomic fundamentals and resilient performance amid global challenges.
The report attributes this robust growth to several key factors, including solid investment demand supported by the healthy balance sheets of banks and corporations, the government’s focus on capital expenditure, and prudent monetary, regulatory, and fiscal policies. These factors have helped the Indian economy navigate adverse global macroeconomic conditions and financial environments effectively.
Inflation and External Sector
While the RBI expects headline inflation to moderate further, it has flagged potential risks to food inflation, highlighting its vulnerability to supply-side shocks.
"The real GDP growth for 2024-25 is projected at 7.0 per cent with risks evenly balanced," it said.
Despite these concerns, the easing of headline inflation towards target levels is anticipated to spur consumption demand, especially in rural areas.
The external sector remains a pillar of strength for the Indian economy, with substantial foreign exchange reserves acting as a buffer against global economic spillovers. This resilience is critical as the country faces potential risks from geopolitical tensions, geoeconomic fragmentation, global financial market volatility, international commodity price movements, and erratic weather patterns.
Looking Ahead
The RBI projects the real GDP growth for 2024-25 to remain steady at 7.0%, with risks considered evenly balanced. The report also emphasized that India is well-planned to enhance its growth trajectory over the next decade, maintaining macroeconomic and financial stability.
"As headline inflation eases towards the target, it will spur consumption demand especially in rural areas," it said.
However, the RBI warned of downside risks to growth and potential upward pressure on inflation from various global and domestic factors.
The central bank warns that it is necessary for the Indian economy to navigate emerging challenges, including the rapid adoption of artificial intelligence and machine learning technologies and recurrent climate shocks.
RBI’s Financial Performance
In FY24, the RBI's financial performance improved significantly, with income increasing by 17.04% and expenses falling by 56.3%. A significant surplus of Rs 2.11 lakh crore was transferred to the central government as a result of this financial health, which was further strengthened by an increase in interest income from foreign securities. Furthermore, in FY24, the RBI set aside Rs 42,820 crore for the contingency fund.
(Inputs from agencies)
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