RBI cuts FY23 GDP growth forecast

­Mumbai: The Reserve Bank of India (RBI) on Wednesday lowered the country's GDP growth forecast to 6.8 per cent for the current fiscal from 7 per cent earlier, on account of continued geo-political tensions and tightening of global financial conditions.

India, however, remains a bright spot in the otherwise gloomy world and will be among the fastest growing major economies, said RBI Governor Shaktikanta Das, while announcing the latest bi-monthly monetary policy.

"The biggest risks to the outlook continue to be the headwinds emanating from protracted geo-political tensions, global slowdown and tightening of global financial conditions," he said. Taking all these factors into consideration, the RBI projected the real GDP growth for 2022-23 at 6.8 per cent, with the third quarter at 4.4 per cent and the fourth at 4.2 per cent. Gross Domestic Product (GDP) growth is projected at 7.1 per cent for April-June period of 2023-24 and at 5.9 per cent for the following quarter.

Even after this revision in our growth projection for 2022-23, India will still be among the fastest growing major economies in the world," the Governor said. It is to be noted that it is for the third time this fiscal that the central bank has pared the growth projections for 2022-23. In April, the central bank had cut the GDP growth estimate from 7.8 per cent to 7.2 per cent, and further lowered it to 7 per cent in September. As per the official government data, the GDP growth in the second quarter of the fiscal slowed to 6.3 per cent from 13.5 per cent in the preceding three months. For the Indian economy, Das said the outlook is supported by good progress of rabi sowing, sustained urban demand, improving rural demand, a pick-up in manufacturing, rebound in services and robust credit expansion. Consumer price inflation moderated to 6.8 per cent (y-o-y) in October as expected, but it still remains above the upper tolerance band of the target. Core inflation is exhibiting stickiness.

"While headline inflation may ease through the rest of the year and Q1:2023-24, it is expected to rule above the target," he said. The medium-term inflation outlook is exposed to heightened uncertainties from geopolitical tensions, financial market volatility and the rising incidence of weather-related disruptions.