Outlook for Indian economy remains bright on government’s push on capex, fiscal consolidation: RBI

“The outlook for the Indian economy remains bright, underpinned by a sustained strengthening of macroeconomic fundamentals, robust financial and corporate sectors and a resilient external sector,” the annual report said.

The government’s continued thrust on capex while pursuing fiscal consolidation, and consumer and business optimism augur well for investment and consumption demand.

Indian economy expanded at a robust pace in 2023-24, with real GDP growth accelerating to 7.6 per cent from 7 per cent in the previous year — the third successive year of 7 per cent or above growth, as per the second advance estimates of National Income 2023-24 released by the National Statistical Office (NSO) in February. The real GDP growth for 2024-25 is projected at 7 per cent with risks evenly balanced.

The report said as the headline inflation eases towards the 4 per cent target, it will spur consumption demand especially in rural areas. The RBI has projected consumer price-based inflation (CPI) or retail inflation to ease to 3.8 per cent in the July-September quarter. For FY25, inflation is projected at 4.5 per cent.

The report said that the geopolitical tensions, geoeconomic fragmentation, global financial market volatility, international commodity price movements and erratic weather developments pose downside risks to the growth outlook and upside risks to the inflation outlook.

The economy would also have to navigate the medium-term challenges posed by rapid adoption of Artificial Intelligence (AI)/ Machine Learning (ML) technologies and recurrent climate shocks, it said.