RBI forecasts India's GDP growth surging beyond 7%

In its April monthly bulletin, the Reserve Bank of India (RBI) heralds a promising trajectory for India's GDP growth, poised to surpass the 7 percent mark. The report indicates a notable shift towards growth, reminiscent of pre-Covid times in the early 2020s.

Optimistic Projections

According to the bulletin, prevailing conditions signal the continuation of an upward trend in India's real GDP growth. This momentum is underpinned by robust investment demand and buoyant business and consumer sentiments.

Furthermore, the report highlights the sustained global growth momentum in the first quarter of 2024, coupled with a favorable outlook for global trade. Notably, treasury yields and mortgage rates are on the rise in major economies, reflecting anticipations of interest rate adjustments.

Implications for India

The optimistic global trade outlook is poised to invigorate Indian exports, consequently fueling economic growth. India's recent economic performance has defied expectations, prompting a series of upward revisions in growth projections. For instance, the International Monetary Fund (IMF) has progressively revised its forecast for India in 2023, cumulatively increasing by 80 basis points between April 2023 and January 2024.

In the latest assessment, the IMF anticipates India to contribute a significant 16 percent to global growth, securing the second-largest share worldwide. This underscores India's position as the fifth-largest economy globally, with prospects to surpass both Germany and Japan in the coming decade.

Inflation and Risks

While India's Consumer Price Index (CPI) inflation moderated to 4.9 percent in March, down from an average of 5.1 percent in the preceding two months, the bulletin warns of potential risks. In the near term, extreme weather events and prolonged geopolitical tensions may pose inflationary pressures. Additionally, volatile crude oil prices remain a concern, influenced by geopolitical developments.

In conclusion, the RBI's bulletin paints a positive outlook for India's economic growth trajectory, bolstered by robust domestic demand and favorable global conditions. However, it remains vigilant against potential risks that could disrupt this momentum.