For financial year 2024-25, the focus should be to sustain growth momentum by securing real GDP growth of at least 7 per cent, an article published in the RBI’s monthly bulletin for January said.
For the current fiscal ending March 31, 2024, the RBI has projected real GDP growth of 7 per cent. The first advance estimate, released by the National Statistical Office (NSO) earlier this month, said the country’s economy is expected to grow at 7.3 per cent in the current fiscal. On Wednesday, RBI Governor Shaktikanta Das in Davos said the GDP growth in India will touch 7 per cent in 2024-25.
“In India, potential output is picking up with actual output running above it, although the gap is moderate. In 2024-25, the objective should be to sustain this momentum by securing real GDP growth of at least 7 per cent in an environment of macroeconomic stability,” the RBI article said. Accordingly, inflation needs to align with the target by the second quarter of the year, as projected, and get it anchored there, it said.
The government has mandated the RBI to keep CPI in the 2-6 per cent band. Headline inflation, as measured by y-o-y changes in the all-India consumer price index (CPI), edged up to 5.7 per cent in December 2023 from 5.6 per cent in November. For financial year 2024-25 (FY24), RBI expects CPI print to be at 5.4 per cent. CPI inflation for first quarterQ1FY25 is projected at 5.2 per cent, Q2 at 4 per cent and Q3 at 4.7 per cent.
In his speech at Davos, Das said the CPI inflation is expected to average around 4.5 per cent in FY 2024-25.
The article has been prepared by RBI Deputy Governor Michael Patra and other central bank officials. The RBI said the views published in the article are of the authors and not of the institution.
The authors further said that the balance sheets of financial institutions need to be strengthened and asset quality improved even further.
The latest Financial Stability Report (FSR), released by the RBI last month, said that the gross non-performing assets (GNPAs) ratio of banks declined to a multi-year low of 3.2 per cent and the net non-performing assets (NNPAs) ratio to 0.8 per cent in September 2023.
The gains of the transformative technological change that is underway must be harnessed for inclusive and participative growth in a sound risk-free environment, the article said.
“Above all, the virtuous thrust to investment from government capex must be partnered and even led by the corporate sector, supplemented by foreign direct investment,” it said.