India needs to secure GDP growth of at least 7% in FY25, the RBI report said
India should maintain strong growth momentum in the next financial year by securing GDP growth of at least 7 percent, while headline inflation should be in line with the 4 percent target in the second quarter, as forecast, it said. the Reserve Bank of India’s (RBI’s) report on the state of the economy was released on Thursday.
The report states that “potential output is picking up while actual output is above that, although the gap is moderate,” indicating that the economy is not overheating.
“…the positive impetus in investment from public sector investments must be supported and even led by the business community, supplemented by foreign direct investment,” said the report, authored by RBI staffers including Deputy Governor Michael Patra. The report does not represent the views of the central bank.
Regarding December’s inflation figures, which rose to 5.7 percent from 5.6 percent in November, the report noted that this was mainly due to an adverse base effect of around 50 basis points (bps), which created negative price momentum of approximately 50 basis points. 30 fps.
“The negative momentum in headline CPI was driven by a 73 basis point month-on-month decline in food prices,” the report said.
Importantly, the report notes that core inflation fell to 3.8 percent in December from 4.1 percent in November, the lowest in more than four years. Commenting on the National Statistical Office’s (NSO) initial estimates, which forecast the Indian economy to grow 7.3 percent in 2023-24, the report said the stronger-than-expected growth was underpinned by a shift from consumption to investment, with growth Government pressure on capital investment beginning to infiltrate private investment, as high corporate profitability begins to drive fixed asset creation quarter after quarter.
In this context, the report said, the housing market is seeing its highest sales in more than a decade and real estate is showing remarkable resilience and adaptability. “Anecdotal evidence suggests that house renters are becoming owners of larger homes – a development that is widely expected to become a trend,” the report said, adding that the pace of real fixed asset investment in 2023-2024 will see a has reached historically high levels, which bodes well for improving the productive capacity of the economy.
The report states that the global economy has shown extraordinary resilience amid ongoing wars, tight financial conditions and devastating climate change. Economies around the world are adapting better than expected and this provides a strong foundation for the year ahead, the report said.
“…projections are consistently proven pessimistic by incoming data. Projections of global growth that are currently well below 3 percent for 2024 may once again be positively belied,” the report said.
“The key catalyst is the preference of global companies to own their resources and locate them in India, which has quality real estate, competitive rental prices, an exceptional talent pool and a continuously growing economy,” the report said.
Another comparative advantage for India is its growing data center capacity, which is expected to exceed one gigawatt by 2024 and position the country as a global data center hub.
“This development has a positive impact on foreign direct investment, which has turned around in the second half of 2023-2024 and is increasingly flowing into business services,” it added.
First print: January 18, 2024 | 9:18 PM IST