RBI Projects GDP Growth At 7.8% And CPI Inflation At 4.5% For FY22-23

Recovery in domestic economic activity is yet to be broad-based, as private consumption and contact-intensive services remain below pre-pandemic levels, says Shaktikanta Das

New Delhi: The Reserve Bank of India’s (RBI’s) Monetary Policy Committee (MPC) on Thursday pegged the economic growth rate for FY22-23 at 7.8 per cent, down from 9.2 per cent estimated in FY21-22 because of uncertainties on the wake of the pandemic and elevated global commodity prices.

However, the central bank’s growth projection for the next fiscal year is lower than 8-8.5 per cent projected by the finance ministry in the Economic Survey.

RBI Governor Shaktikanta Das, while unveiling the bi-monthly policy, said, “Recovery in domestic economic activity is yet to be broad-based, as private consumption and contact-intensive services remain below pre-pandemic levels.”

The announcements in the Union Budget 2022-23 on boosting public infrastructure through enhanced capital expenditure are expected to augment growth and crowd in private investment through large multiplier effects, Das said.

“Global financial market volatility, elevated international commodity prices, especially crude oil, and continuing global supply-side disruptions pose downside risks to the outlook,” Das said, while adding that there is some loss of the momentum of near-term growth while global factors are turning adverse.

“Looking ahead, domestic growth drivers are gradually improving. Considering all these factors, real GDP growth is projected at 7.8 per cent for 2022-23 with Q1:2022-23 at 17.2 per cent; Q2 at 7.0 per cent; Q3 at 4.3 per cent; and Q4 at 4.5 per cent,” he said.

According to the first advance estimates of national income released by the National Statistical Office (NSO) on January 7, 2022, the real gross GDP growth was 9.2 per cent for FY21-22, surpassing its pre-pandemic (2019-20) levels.

Meanwhile the RBI retained its inflation projection at 5.3 per cent for the current financial year.

Retail inflation rose to a five-month high of 5.59 per cent in December, from 4.91 per cent in November, mainly due to an uptick in food prices. The MPC has been given the mandate to maintain annual inflation at 4 per cent until March 31, 2026, with an upper tolerance of 6 per cent and a lower tolerance of 2 per cent.

“The transmission of input cost pressures to selling prices remains muted in view of the continuing slack in demand. Further as risks from Omicron wanes and supply-chain pressures moderate, there could be some softening of core inflation. On balance, the inflation projection for 2021-22 is retained at 5.3 per cent, with Q4, that is the current quarter at 5.7 per cent on account of unfavourable base effect that eased subsequently,” Das said.

Core inflation remains elevated but demand pull pressures are still muted. The renewed surge in international crude oil prices however needs to be closely monitored,” the governor added.