In light of rising inflation and falling demand, the Reserve Bank of India (RBI) has revealed its monetary policy today.
While the RBI has decided not to cut interest rates, it has lowered India’s GDP growth forecast for the financial year 2025 from 7.2% to 6.6%.
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GDP Growth Decline
This revision comes after India’s GDP growth rate dropped to 5.4% in the July-September quarter, marking the lowest growth rate in seven quarters, the weakest since the third quarter of FY 2023.
Economic Outlook and Adjustments
Despite the decline, RBI Governor Shaktikanta Das stated that the slowdown in GDP is not as severe as expected.
He pointed out that the manufacturing sector is facing challenges in only certain areas, and the overall slowdown in the domestic economy is relatively mild, particularly in the September quarter.
The growth estimate for FY25 remains unchanged at 7.0% for Q2. However, growth projections for the remaining quarters have been revised down.
In Q3, the forecast dropped from 7.4% to 6.8%, and in Q4, from 7.4% to 7.2%. For FY26, Q1 growth is now expected at 6.9%, down from 7.3%, while Q2 growth is expected to remain at 7.3%.
Reasons Behind the Revised Growth Forecast
The RBI made this decision after India’s GDP growth rate fell to a seven-quarter low of 5.4% during the July-September period. This was the lowest growth rate since the third quarter of FY 2023.
No Major Economic Slowdown
Despite the revised growth estimate, RBI Governor Shaktikanta Das emphasized that the slowdown in GDP was not as severe as expected.
He noted that the slowdown in the economy has been limited to specific sectors, especially in manufacturing. According to Das, the slowdown reached a “low level” during the September quarter.
The GDP growth forecast for FY25 was originally 7.0% in Q2, which has been maintained. However, the forecast for Q3 has been reduced from 7.4% to 6.8%,
and for Q4, it has been cut from 7.4% to 7.2%. Similarly, the growth estimate for Q1FY26 has been lowered from 7.3% to 6.9%, while Q2FY26 remains at 7.3%.