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RBI Bulletin: Optimistic about India ‘whatever the odds’, FY24 GDP growth could be 7%

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The RBI’s staff made the comments in their monthly State of the Economy article.

Members of the Reserve Bank of India (RBI) are optimistic about the outlook for the Indian economy “whatever the odds” and expect it to maintain the pace it has exhibited in 2022-23.

“…unlike the global economy, India would not slow down – it would maintain the pace of expansion achieved in 2022-23,” RBI staff wrote in their regular State of the Economy article, published on March 21 in the central bank’s monthly bulletin.

“We remain optimistic about India, whatever the odds,” the article added.

The views expressed in the article, which counts Deputy Governor Michael Patra among its co-authors, do not represent the views of the RBI.

Writing in the monthly article, RBI staff pinned their growth hopes on additional spending by households next year following the Rs 35,000 crore worth of tax relief announced by the 2023-24 Budget and the possibility of a third of the Rs 3.2-lakh-crore increase in effective capital expenditure boosting gross fixed capital formation.

“India’s real GDP can go up from Rs 159.7 lakh crore in 2022-23 to not just Rs 169.7 lakh crore in 2023-24 as is currently being projected but to Rs 170.9 lakh crore. This is simple arithmetic; hardly a hurray at half-time,” the article asserted.

A real GDP of Rs 170.9 lakh crore in 2023-24 would mean a growth rate of 7 percent from Rs 159.7 lakh crore in 2022-23 – 60 basis points higher than the RBI’s official forecast for next year.

One basis point is one-hundredth of a percentage point.

The Economic Survey for 2022-23 had pegged next year’s growth rate at 6.5 percent, while the RBI’s official forecast for the 2023-24 GDP growth rate is 6.4 percent. Meanwhile, most private sector economists’ estimates are lower than 6 percent.

In their article, the RBI staff said the October-December GDP data – which showed India’s growth rate fell to 4.4 percent – indicated that the Indian economy is “intrinsically better positioned” than many parts of the world heading into what they called would be a challenging year.

“Year-on-year growth rates do not reflect this pick-up of pace because by construction they are saddled with statistical base effects, and instead suggest a sequential slowing down through successive quarters of 2022-23 to an unsuspecting reader,” the RBI staff said, echoing comments made by Chief Economic Adviser V Anantha Nageswaran.

The latest quarterly GDP data implies a growth rate of 5.1 percent in the last quarter of 2022-23, which private sector economists widely agree is unlikely to be achieved. However, Nageswaran told reporters after the data was released on February 28 that India is poised to achieve 7 percent growth this year.

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