RBI retains FY24 GDP forecast at 6.5%, raises inflation projection

The RBI on Thursday retained the GDP growth projection for the current fiscal year at 6.5% and raised the inflation projection marginally to 5.4% due to a spike in vegetable prices, including tomatoes.

Unveiling the bi-monthly monetary policy, Reserve Bank Governor Shaktikanta Das said domestic economic activity is maintaining resilience.

He also said the recovery in kharif sowing and rural incomes, the buoyancy in services and consumer optimism should support household consumption.

"Headwinds from weak global demand, volatility in global financial markets, geopolitical tensions and geoeconomic fragmentation, however, pose risks to the outlook," Das said.

Taking all these factors into consideration, real GDP growth for 2023-24 is projected at 6.5% with Q1 at 8 per cent; Q2 at 6.5%; Q3 at 6%; and Q4 at 5.7%.

Real GDP growth for Q1 of 2024-25 is projected at 6.6%.

On inflation, the governor said the spike in vegetable prices, led by tomatoes, would exert sizeable upside pressures on the near-term headline inflation trajectory.

"This jump is, however, likely to correct with fresh market arrivals," he said, and added there has been significant improvement in the progress of the monsoon and kharif sowing in July.

However, Das added the impact of the uneven rainfall distribution warrants careful monitoring.

Consumer Price Index (CPI) based retail inflation is projected at 5.4% for 2023-24, the governor said.

The CPI for Q2 has been projected at 6.2%, Q3 at 5.7% and Q4 at 5.2%, with risks evenly balanced.

The retail inflation for Q1 of 2024-25 is projected at 5.2%.

Headline CPI inflation picked up from 4.3% in May to 4.8% in June, driven largely by food group dynamics on the back of higher prices of vegetables, eggs, meat, fish, cereals, pulses and spices.