The Reserve Bank of India’s “state of economy” report, which was released on Wednesday, projects that real GDP growth in India would likely reach 6% in FY25. The current estimate, which follows the upward revision of the projected growth rate for FY24 from 6.5% to 7%, is less than the 6.5% forecast in the Monetary Policy Committee report from October. According to the most recent analysis, GDP growth is predicted to be 7.1% in FY24.
Furthermore, the research stated that beneficial demand side factors and the easing of supply side limitations are at work, and that consumer price index inflation could average 5.3% in FY24 and decline to 4.8% in FY25. It is anticipated that GDP will continue to grow in spite of global challenges, as inflation continues to moderate.
The assumption used to calculate the GDP growth prediction was that global GDP growth may reach 2.6% in FY24 and 2.1% in FY25. Inflation based on the global consumer price index (CPI) is now projected to be 5.5% in FY24 and 4% in FY25. Aside from the RBI policy repo rate remaining steady, the estimates also imply that the US Fed funds rate would be 5.5% in the upcoming fiscal year and 6.5% in FY24.
However, the RBI emphasised that the credit markets are still adjusting to the RBI MPC’s 250-bps repo rate hike. The weighted average lending rate (WALR) on new rupee loans rose by 199 basis points (bps) between May 2022 and October 2023, which includes an increase of 18 bps since April 2023.
It further stated that rates on existing term deposits are still rising as a result of term deposit repricing, even though the WADTDR on new deposits has decreased recently. According to the report, public sector banks had higher pass-through rates to WALR on new rupee loans and to WADTDR on fresh deposits than private banks did. However, private banks had higher transmission rates to WALR on outstanding loans.
