RBI Bulletin: Indicators Suggest GDP Growth Closer To 8% In FY24
High visibility of structural demand and healthier corporate and bank balance sheets will likely be the galvanising forces for growth, it said.
GDP growth for fiscal 2024 may surpass estimates, given that it already exceeded expectations during the quarter, according to the Reserve Bank of India.
Real GDP expanded at a six-quarter high rate of 8.4% in the October-December period, powered by strong momentum, robust indirect taxes and lower subsidies, the RBI said in its monthly bulletin published on Tuesday.
"Our nowcast of real GDP growth for January–March 2024, seen in conjunction with high-frequency indicators for the fourth quarter, suggests that the NSO’s estimate for the full year 2023–24 will be exceeded and a rate closer to 8% may be clocked," it said.
The National Statistical Office forecasts GDP growth at 7.6% for FY24.
The high visibility of structural demand and healthier corporate and bank balance sheets will likely be the galvanising forces for growth going forward, the bulletin said.
The Indian economy is experiencing a conducive macroeconomic configuration that can be its launching pad for a step-up in its growth trajectory, the central bank said. "Over the period 2021–24, growth has averaged above 8%, and the underlying fundamentals indicate that this can be sustained and even built upon."
Other Key Highlights
The biggest segment of aggregate demand—private final consumption expenditure—remained low, despite the third quarter coinciding with the festive season.
Market research indicates that the domestic fast-moving consumer goods sector may experience moderate growth over the next six months.
The demand outlook for premium consumer businesses is robust and the growth pattern is expected to persist into the medium term.
This suggests there are significant per capita income shifts underway.
The manufacturing base has also been expanding. For instance, the entire semiconductor chip value chain—design, packaging and fabrication—has established its presence in the country.
Even as inflation is on the ebb with broad-based softening of core inflation, the repetitive incidence of short-amplitude food price pressure deters a swifter fall in headline inflation towards the target of 4%, the RBI said.
CPI readings for January and February show that the winter easing of vegetable prices turned out to be shallow and short-lived, the central bank noted. Food price pressures on headline inflation have been capped by core disinflation, among its lowest prints in the series. The softening of core inflation has been broad-based. Fuel prices remain in deflation and this may get pronounced in March due to a reduction in the price of liquified petroleum gas, it said.
Overall, headline inflation’s momentum turned positive in February, offsetting a favourable base effect, according to the bulletin. "Accordingly, monetary policy has to remain in a risk minimisation mode, guiding inflation towards the target while sustaining the momentum of growth."
