Economy to Grow 7.2 Percent Despite Weak Q1: RBI Governor
By : Falaknaaz Syed
Update: 2024-09-05 15:52 GMT
MUMBAI: The Reserve Bank of India (RBI) governor Shaktikanta Das on Thursday called for a multi-pronged and a multi-sectoral approach for the country to realise its aspiration of transitioning from an emerging to an advanced economy by 2047. The central bank chief said that the Indian growth story remains intact with consumption and investment demand growing in tandem, and emphasised that past reforms need to be augmented by reforms in land, labour and agricultural markets. Das also said that RBI would stick to its economic growth estimation of 7.2 per cent for the financial year 2024-25 despite the moderation in growth witnessed from the previous quarter.
India’s GDP growth for the first quarter of the fiscal year fell short of expectations. The growth rate for April-June was recorded at 6.7 per cent, a fall from 8.2 per cent during the same period last fiscal and below the RBI’s projection of 7.1 per cent.
“Notwithstanding the moderation in growth from the previous quarter and below our projection for Q1, the data shows that the fundamental growth drivers are gaining momentum. This gives us confidence to say that the Indian growth story remains intact,” said Das in his inaugural address titled India at an inflection point: Some thoughts at the FICCI-IBA conference.
He said consumption and investment demand, the two main drivers of growth, are growing in tandem. Private consumption, which is the mainstay of aggregate demand with a share of around 56 per cent in GDP, has rebounded to 7.4 per cent growth from a feeble 4 per cent growth in the second half of the previous year, reconfirming the revival of rural demand.
"The headline number (Q1 GDP), however, came lower against the backdrop of muted government expenditure of both the centre and the states, perhaps due to the Lok Sabha elections. Excluding government consumption expenditure, GDP growth works out to 7.4 per cent," he said. According to Das, the government expenditure of the centre and the states is likely to pick up pace in line with the Budget Estimates in the remaining quarters of the year.
“Strong balance sheets of banks and corporates have created congenial conditions to further support private capex. Corporate profits (net) have grown by 14.2 per cent in Q1:2024-25. Government capex continues to be strong. Overall, the Reserve Bank’s projection of GDP growth at 7.2 per cent for 2024-25 does not appear out of place,” said Das.
Meanwhile at the event Das said that he expects new monetary policy committee members to be appointed on time for the October meeting. The existing term of the three external members of the MPC committee will end on October 4; the next MPC meeting is on October 9.
“Notwithstanding the moderation in growth from the previous quarter and below our projection for Q1, the data shows that the fundamental growth drivers are gaining momentum. This gives us confidence to say that the Indian growth story remains intact,” said Das in his inaugural address titled India at an inflection point: Some thoughts at the FICCI-IBA conference.
He said consumption and investment demand, the two main drivers of growth, are growing in tandem. Private consumption, which is the mainstay of aggregate demand with a share of around 56 per cent in GDP, has rebounded to 7.4 per cent growth from a feeble 4 per cent growth in the second half of the previous year, reconfirming the revival of rural demand.
"The headline number (Q1 GDP), however, came lower against the backdrop of muted government expenditure of both the centre and the states, perhaps due to the Lok Sabha elections. Excluding government consumption expenditure, GDP growth works out to 7.4 per cent," he said. According to Das, the government expenditure of the centre and the states is likely to pick up pace in line with the Budget Estimates in the remaining quarters of the year.
“Strong balance sheets of banks and corporates have created congenial conditions to further support private capex. Corporate profits (net) have grown by 14.2 per cent in Q1:2024-25. Government capex continues to be strong. Overall, the Reserve Bank’s projection of GDP growth at 7.2 per cent for 2024-25 does not appear out of place,” said Das.
Meanwhile at the event Das said that he expects new monetary policy committee members to be appointed on time for the October meeting. The existing term of the three external members of the MPC committee will end on October 4; the next MPC meeting is on October 9.