RBI Retains Real GDP Growth Forecast At 7.2% for FY23, Projects Q1 GDP Growth At 16.2%

The Reserve Bank of India on Wednesday retained its growth projection at 7.2 per cent for the current fiscal on the back of improvement in urban demand and gradual recovery in rural India.

Unveiling the third monetary policy for the current fiscal, RBI Governor Shaktikanta Das said the Indian economy remained resilient, and the central bank will continue to support growth.

The RBI expects growth in the first quarter of the current fiscal at 16.2 per cent, which will taper to 4 per cent by the fourth quarter.

"The rebound in contact-intensive services is expected to sustain urban consumption. Our surveys suggest further improvement in consumer confidence and households’ optimism for the outlook a year ahead. Business sentiment remains upbeat according to early results of our surveys. Nevertheless, the negative spillovers from geopolitical tensions; elevated international commodity prices; rising input costs; tightening of global financial conditions; and slowdown in world economy continue to weigh on the outlook. Taking all these factors into consideration, the real GDP growth for 2022-23 is retained at 7.2 per cent, with Q1 at 16.2 per cent; Q2 at 6.2 per cent; Q3 at 4.1 per cent; and Q4 at 4.0 per cent, with risks broadly balanced." the governor said.

Governor Das noted that an increase in contact-intensive services is expected to lead the urban consumption. The rural demand is likely to improve gradually with an improvement in the agricultural sector and the likelihood of a normal southwest monsoon season.

"Available information for April and May 2022 indicates that the recovery in domestic economic activity remains firm, with growth impulses getting increasingly broad based. Manufacturing and services purchasing managers’ indices (PMIs) for May point towards further expansion of activity. This is also corroborated by movements in railway freight and port traffic, domestic air traffic, GST collections, steel consumption, cement production and bank credit. While urban demand is recovering, rural demand is gradually improving." the governor added.

He, however, cautioned that there are risks from the ongoing Russia-Ukraine war. The central bank earlier in April slashed the GDP growth projection for 2022-23 to 7.2 per cent from its earlier forecast of 7.8 per cent.

World Bank Forecast

On Tuesday, the World Bank cut India's economic growth forecast for the current fiscal to 7.5 per cent as rising inflation, supply chain disruptions, and geopolitical tensions taper recovery. It was the second time that the World Bank has revised its GDP growth forecast for India in the current fiscal 2022-23 (April 2022 to March 2023).

In April, it trimmed the forecast from 8.7 per cent to 8 per cent and now it is projected at 7.5 per cent. The GDP growth compares to an 8.7 per cent expansion in the previous 2021-22 fiscal. India's economy grew by 4.1 per cent in the January-March quarter of 2021-22.

(With inputs from PTI)