The RBI estimates growth for FY25 at 7% and highlights cross-sectoral positives that will boost the economy

“The outlook for the Indian economy remains strong, supported by sustained strengthening of macroeconomic fundamentals, a robust financial and corporate sector and a resilient external sector,” the RBI said in its report.

Looking ahead, the central bank said the government’s continued attempts to balance capital spending through fiscal consolidation and optimism among consumers and businesses “bode well for investment and consumption demand.”

These factors are likely to be further supported by a number of positive developments taking place in the agriculture and rural sectors, construction and electronics production.

The RBI noted that the agriculture sector is likely to benefit from the El Nino outflow and southwest monsoon, which are expected to be above normal this year.

“This trend in construction is likely to continue, supported by demand for both residential and non-residential properties,” the report continues. “Emerging sectors such as renewable energy and semiconductors are expected to make rapid progress thanks to recent initiatives.”

It also said that the interim budget for 2024-25 has allocated Rs 6,903 crore for semiconductor and display factories, which the RBI said will “contribute to making India a global chip and electronics manufacturing hub.”

“Taking these factors into account, real GDP growth in 2024–2025 is projected to be 7.0 percent at balanced risks,” the report says.

On the inflation front, the central bank expects the southwest monsoon, with warmer temperatures, to bring down food price inflation. However, he added that the increasing incidence of climate shocks creates significant uncertainty about food inflation and the overall inflation outlook.

Overall, the RBI forecasts that retail inflation as measured by the Consumer Price Index will average 4.5% in 2024-25, still above the target of 4%.

Moksha M. Munoth is an intern at ThePrint.

(edited by Mannat Chugha)

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