RBI Forecasts 7.0 Percent Real GDP Growth for India in 2024-25
The Reserve Bank of India (RBI) has forecasted a 7.0 percent real GDP growth for 2024-25. “Real GDP growth for 2024-25 is projected at 7.0 percent with risks evenly balanced”, the RBI said in its annual report. The forecast indicates a boost in various sectors such as real estate, renewable energy, and semiconductors. The RBI also noted that construction activity is expected to maintain momentum, driven by demand in both residential and non-residential real estate. Additionally, emerging industries like renewable energy and semiconductors are poised to experience significant progress, buoyed by recent governmental initiatives.
It also noted that the allocations made in Union Budget 2024-25 for semiconductors and display fabs would contribute to making India a global hub for chip and electronics manufacturing. “These factors are expected to create new employment opportunities, improve labour incomes and strengthen domestic demand”, the central bank added.
It was also mentioned that investments would be directed towards sectors where the government has provided production-linked incentives (PLI). “Despite subdued global economic activity and multiple headwinds, the Indian economy expanded impressively, with real GDP growth accelerating to 7.6 percent from 7.0 percent in the previous year – the third successive year of 7 percent or above growth”, the RBI highlighted in its the annual statement.
In its report, the RBI emphasized that the alleviation of supply chain pressures, along with a widespread decrease in core inflation, and promising signs of an above-average southwest monsoon, bode well for the inflation prospects in 2024-25. Additionally, the central bank stated its intention to employ a suitable combination of measures to regulate both temporary and lasting liquidity, ensuring that interest rates in the money market develop smoothly, thereby safeguarding financial stability.
“The central government extended the financial assistance scheme for states’ capital expenditure to 2024-25 with an outlay of Rs 1.3 lakh crore. The budgeted reduction in gross market borrowings from 5.3 percent of GDP in 2023-24 (RE) to 4.3 percent of GDP in 2024-25 (BE) will enhance the flow of funds to the private sector and support private investment”, the Central Bank added.
Acknowledging the advantages of digitizing the tax system, it was observed that tax collections have seen a significant increase. The Centre anticipates that direct tax revenues will climb to 6.7 percent of GDP in 2024-25, marking the highest level in three decades. The central bank indicated that the current account deficit (CAD) is projected to remain manageable in 2024-25, attributing it to the anticipated rebound in global trade. Additionally, it highlighted that India's share of global remittance receipts is forecasted to rise to 15.2 percent in 2024 from 11.1 percent in 2019. The RBI, in its report, cautioned that various regulatory and supervisory measures will be implemented in 2024-25 to further bolster financial intermediaries.