The Reserve Bank of India (RBI) on Wednesday kept unchanged its FY23 real economic growth projection for the country at 7.2%, indicating that risks are more or less evenly balanced since its April forecast.
It now projects the real GDP growth in Q1 at 16.2%; Q2 at 6.2%; Q3 at 4.1%; and Q4 at 4%. The projection seems to have factored in a waning favourable base effect with the passing quarter of this fiscal. The central bank had refrained from revising either its GDP growth projection or inflation forecast in May, when it announced an out-of-cycle repo rate cut of 40 basis points.
Stating that economic activities are gaining traction, the central bank suggested that rural consumption would benefit from brightening farm prospects following the forecast of a normal monsoon season. Similarly, the on-going recovery in contact-intensive services will likely bolster urban consumption. Investment, too, could be aided by improving capacity utilisation, the government’s capex push and rising credit flow. Growth of both merchandise and services exports is expected to sustain the good momentum.
“(However) spill-overs from prolonged geopolitical tensions (Ukraine war), elevated commodity prices, continued supply bottlenecks and tightening global financial conditions nevertheless weigh on the outlook,” the RBI said on a day when it raised the repo rate by 50 basis points, to curb runaway inflation that hit an eight-year high of 7.79% in April.