RBI MPC: Central Bank Slashes GDP Growth Forecast To 7 Per Cent For Current Fiscal Year

RBI in April slashed the real GDP growth projection to 7.2 per cent from its earlier forecast of 7.8 per cent for 2022-23

The Reserve Bank of India (RBI) on Friday slashed the growth projection to 7 per cent for the current fiscal year from the earlier forecast of 7.2 per cent, citing aggressive tightening of monetary policies globally and moderation in demand.

Unveiling the fifth monetary policy for this fiscal, RBI Governor Shaktikanta Das said the central bank remains committed to price stability to put the country on the sustained path of growth.

Real GDP growth in the first quarter of the current fiscal was 13.5 per cent.

The central bank in April slashed the real GDP growth projection to 7.2 per cent from its earlier forecast of 7.8 per cent for 2022-23. 

Recently, India’s economic growth in the current fiscal year is projected at 7.3 per cent with downside risks said S&P Global Ratings. The rating agency said that inflation is likely to remain above the RBI’s upper tolerance band of 6 per cent till the end of 2022.

The Asian Development Bank (ADB) has also slashed India's economic growth projection for FY22-23 to 7 per cent from 7.2 per cent earlier, citing higher than expected inflation and monetary tightening.

Global rating agency Fitch has lowered India’s economic growth forecast for current fiscal year (FY23) to 7 per cent from previous estimate of 7.8 per cent.

"Consequently, the standing deposit facility (SDF) rate is now at 5.65 per cent and the marginal standing facility (MSF) rate at 6.15 per cent", RBI Governor Shaktikanta Das said. The SDF is the lower band of the interest rate corridor and the MSF the higher.

Das, however, cautioned that there is a third wave of shock globally triggered by aggressive monetary policy tightening to curb inflation.

There is 67 per cent decline in forex reserve this year due to change in valuation of foreign exchange rate, said Das.

The RBI does not have a fixed exchange rate for rupee; intervenes in market to curb excessive volatility, he said during the MPC, while adding, monetary policy must remain alert and nimble.

The governor said that bank credit has grown at accelerated pace of 16.2 per cent.