RBI MPC Outcome: Governor Das retains India’s real GDP growth projections for FY25 at 7.2%

The Reserve Bank of India's (RBI) monetary policy committee (MPC) continues to see the Indian economy growing at 7.2 per cent in the financial year 2024-25 (FY25). The rate-setting panel moderated its growth outlook for the second quarter while raising expectations for the last two quarters of FY25 and the first quarter of FY26.

“India’s growth story remains intact as its fundamental drivers – consumption and investment demand – are gaining momentum. Prospects of private consumption, the mainstay of aggregate demand, look bright on the back of improved agricultural outlook and rural demand. Sustained buoyancy in services would also support urban demand. Government expenditure of the centre and the states is expected to pick up pace in line with the Budget Estimates. Investment activity would benefit from consumer and business optimism, the government’s continued thrust on capex and healthy balance sheets of banks and corporates,” RBI Governor Shaktikanta Das said on Wednesday, October 9.

Amid this backdrop, the rate-setting panel retained the real GDP growth for FY25 at 7.2% while tweaking it for four quarters.

The growth forecast for Q2 FY25 now stands at 7 per cent from 7.2 per cent earlier. Meanwhile, the growth projection for Q3 FY25 has been revised to 7.4 per cent (7.3 per cent earlier), for Q4 FY25 to 7.4 per cent (7.3 per cent earlier) and Q1 FY26 to 7.3 per cent (7.2 per cent earlier).

India's growth rate in FY24 stood at 8.2 per cent.

RBI MPC Decision

The RBI MPC, along expected lines, kept the repo rate unchanged at 6.5 per cent while changing the stance to ‘neutral’ from ‘withdrawal of accommodation’. Five of the six members voted to hold the rates while all six voted for a shift in policy stance.

Domestic growth has sustained its momentum, with private consumption and investment growing in tandem, said Das. Resilient growth gives us the space to focus on inflation to ensure its durable descent to the 4 per cent target, he added.

Das while commenting on inflation said, “The MPC noted that currently, the macroeconomic parameters of inflation and growth are well balanced. Headline inflation is on a downward trajectory, though its pace has been slow and uneven. Going forward, the moderation in headline inflation is expected to reverse in September and likely to remain elevated in the near-term due to adverse base effects, among other factors.”

RBI MPC retained its FY25 inflation projection at 4.5 per cent.