In response to rising inflation and falling demand, the Reserve Bank of India (RBI) has announced its monetary policy today.
While it has decided to keep interest rates unchanged, the RBI has lowered its GDP growth forecast for India in the financial year 2025 from 7.2% to 6.6%.
Reasons Behind the Revision
The revision follows a drop in India’s GDP growth to 5.4% in the July-September quarter, marking the lowest growth rate in seven quarters, and the weakest since the third quarter of FY 2023.
Despite this decline, RBI Governor Shaktikanta Das emphasized that the slowdown in GDP is not as severe as expected.
He explained that the challenges in the manufacturing sector are limited to certain areas, and the overall economic slowdown is mild, especially in the September quarter.
The growth estimate for FY25 remains unchanged at 7.0% for Q2. However, forecasts for the other quarters have been reduced.
For Q3, the growth forecast has been lowered from 7.4% to 6.8%, and for Q4, it has been reduced from 7.4% to 7.2%.
For FY26, Q1 growth is now expected at 6.9%, down from 7.3%, while Q2 remains at 7.3%.
Decline in GDP Growth
This adjustment follows India’s GDP growth rate falling to 5.4% in the July-September quarter, the weakest growth in seven quarters and the lowest since the third quarter of FY 2023.
Despite this decline, RBI Governor Shaktikanta Das assured that the slowdown is not as severe as initially feared.
He highlighted that challenges in the manufacturing sector are specific to certain areas, and the overall economic slowdown is mild, particularly in the September quarter.
Revised Growth Forecast for FY25 and Beyond
The RBI’s growth estimate for FY25 remains unchanged at 7.0% for the second quarter, but the projections for the following quarters have been adjusted.
The forecast for Q3 has been reduced from 7.4% to 6.8%, while Q4 has seen a drop from 7.4% to 7.2%.
For the first quarter of FY26, growth is now expected at 6.9%, down from 7.3%, while Q2 of FY26 remains unchanged at 7.3%.
