RBI projects India to grow at 9.5% this fiscal

The Reserve Bank on Wednesday retained the GDP growth forecast at 9.5 per cent for the current fiscal but cautioned that the economic recovery is not yet strong enough to be self-sustaining and durable.

In an address after the three-day meeting of the Monetary Policy Committee (MPC), RBI Governor Shaktikanta Das said managing a durable, strong and inclusive recovery is the central bank’s mission. “We need to be persevering, patient and persistent in our efforts. We also need to be aware, alert and agile to the new realities confronting us. Our efforts over the past one year and nine months have given us the confidence and a head start to face the challenges that lie ahead,” he said.

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Das, whose tenure as the Governor was extended by three years recently, further said the Indian economy is relatively well-positioned on the path of recovery but it cannot be immune to global spillovers or to possible surges of infections from new mutations, including the Omicron variant. “Hence, fortifying our macroeconomic fundamentals, making our financial markets and institutions resilient and sound, and putting in place credible and consistent policies will assume the highest priority in these uncertain times,” Das said.

According to him, incoming information indicates that consumption demand has been improving, with pent-up demand getting reinforced by the festive season. Rural demand is exhibiting resilience and farm employment is picking up with the robust performance of agriculture and allied activities. The recent reductions in excise duty and state VAT on petrol and diesel should support consumption demand by increasing purchasing power, Das said.

“… the projection for real GDP growth is retained at 9.5 per cent in 2021-22 consisting of 6.6 per cent in Q3 and 6.0 per cent in Q4 of 2021-22,” he said. Real GDP growth is projected at 17.2 per cent for the first quarter and at 7.8 per cent for the second quarter of 2022-23. The Governor also stressed that the recovery that had been interrupted by the second wave of the pandemic is regaining traction but it is not yet strong enough to be self-sustaining and durable. “This underscores the vital importance of continued policy support,” he added.

The Governor said downside risks to the outlook have risen with the emergence of Omicron and renewed surges of COVID infections in a number of countries. Notwithstanding some recent corrections, headwinds continue to be posed by elevated international energy and commodity prices, potential volatility in global financial markets due to a faster normalisation of monetary policy in advanced economies, and prolonged global supply bottlenecks.

Last month, National Statistical Office (NSO) estimated the Gross Domestic Product (GDP) growth at 8.4 per cent, year-on-year (y-o-y), for the second quarter of the current fiscal. All components of GDP registered y-oy growth, with exports and imports strongly surpassing their pre-COVID levels. Meanwhile, Fitch Ratings, on Wednesday, cut India’s economic growth forecast to 8.4 per cent for the current fiscal but raised the projection for the next financial year to 10.3 per cent. In October, Fitch had forecast a growth of 8.7 per cent for this fiscal and 10 per cent for 2022-23.