RBI's raised growth forecast of 6.5% seen 'optimistic'

Consensus projection of other agencies remains at 6%

- SURABHI AND PRASANTA SAHU

THE RESERVE BANK of India's upward revision in the gross domestic product (GDP) growth forecast for the current fiscal year to 6.5% from the earlier 6.4% is optimistic in the backdrop of slowing private consumption and continued global uncertainties, economists said. It also bucks the trend of downward revisions, albeit modest, of the rate of expansion of the Indian economy by several agencies including the World Bank and the ADB.

The IMF expects the growth to slip to 6.1% in FY24, from 6.8% in FY23 even as the country would remain a "bright spot" in the global economic landscape.

The Monetary Policy Committee (MPC) of the RBI also forecast retail inflation to moderate to 5.2% in FY24 from its February estimate of 5.3%, citing "softening crude prices" and likely easing of food prices. But not many buy this view, in view of the renewed uncertainties on the crude oil front after the recent OPEC+ decision to cut production and lingering concerns over high prices prominent items in the food basket, including milk and certain pulses.

The MPC's growth outlook was based on factors including robust rabi production that has improved prospects for the rural economy, steady growth in contact-intensive services as well as the government's focus on capital expenditure. RBI's surveys also pointed out that businesses and consumers are optimistic about the future outlook.

"Taking all these factors into consideration, real GDP growth for 2023-24 is projected at 6.5% with Q1:2023-24 at 7.8%; Q2 at 6.2%; Q3 at 6.1%; and Q4 at 5.9%, with risks evenly balanced," RBI Governor Shaktikanta Das on Thursday while presenting the first bi-monthly monetary policy statement of FY24.While the latest growth projections are unchanged for Q1 and Q2 from the estimates made in February, the Q3 and Q4 estimates have been revised upward by 0.1 percentage points each.