RBI Governor Projects 7.2% GDP Growth For FY25 Despite Weak Q1 Performance

Das further added that agriculture is expected to perform better for the rest of the year, thanks to a favourable monsoon, which should drive an increase in rural demand

Reserve Bank of India Governor Shaktikanta Das said on Thursday that even though the gross domestic product (GDP) growth for the first quarter of the financial year 2024-25 was recorded as low, the GDP growth projected at 7.2 per cent for FY25 is likely to be achieved.

While speaking at the annual FIBAC banking conference, Das said, "Fundamental growth drivers of the Indian economy are not slowing; they are gaining momentum and this gives us confidence to say that the Indian growth story remains intact."

India's economic growth slowed to 6.7 per cent year-on-year (YoY) in the April-June quarter, falling short of both the 6.9 per cent forecast and the RBI's 7.1 per cent projection. This slowdown was attributed to decreased government spending during the national elections.

Das further added that agriculture is expected to perform better for the rest of the year, thanks to a favourable monsoon, which should drive an increase in rural demand. Additionally, strong investment activity is anticipated to be further boosted by the acceleration of government capital expenditure.

"It is evident that India is on a sustainable growth path. Consumption and investment demand, the two main drivers of growth, are growing in tandem. Overall, the RBI's projection of GDP growth at 7.2 per cent for 2024-25 does not appear out of place,” the governor said.

The central bank’s governor highlighted that the current balance between inflation and growth is well-positioned but stressed the importance of maintaining price stability to support sustained growth over the medium to long term.

Das noted that volatile and high food inflation in the country has repeatedly disrupted the pace of disinflation. "It is the headline inflation that matters. It is the headline inflation with food inflation having a weight of 46 per cent that the people understand," Das said.

However, he added that with the monsoon progressing well, there is increased optimism that the outlook for food inflation could improve over the year.

"We have to remain watchful of how the forces impacting inflation play out. We must successfully navigate the last mile of disinflation, and preserve the credibility of the flexible inflation targeting framework which is a major structural reform," the governor added.