Time for corporate sector to boost investments: RBI Governor; says 7.2% GDP projection for FY25 not unrealistic

Reserve Bank Governor Shaktikanta Das said the central bank’s 7.2 percent GDP growth projection for FY25 is not out of place and structural drivers are playing a bigger role in macroeconomic outcome. Das was speaking at FIBAC 2024 - Banking for Viksit Bharat in Mumbai on September 5. 

The RBI Governor attributed the slowing of India’s economic growth to lower government spending in the wake of the enforcement of the model code of conduct (MCC) for the recent Lok Sabha elections.  

India’s gross domestic product (GDP) slowed to a 15-month low of 6.7 percent in April-June quarter of this fiscal against 8.2 percent in the year-ago period, official data showed.  

Expenditure of both centre, state governments are likely to pick up pace in line with respective budget estimates, Das said, adding that data shows fundamentals of growth drivers are gaining momentum, India’s growth story remains intact. 

The central bank, in its August monetary policy statement, revised India’s growth forecast for the April-June quarter downwards by 20 basis points to 7.1 percent. This adjustment was made due to factors such as subdued government capital expenditure, decreased corporate profitability, and lower core output. Despite this revision, RBI has maintained the full-year FY25 GDP growth estimates at 7.2 percent. 

The RBI governor said that reforms like GST and IBC have yielded long-term positive outcomes and highlighted the need for reforms in land, labour and agri markets. “Must successfully navigate last mile of disinflation,” Das said. 

Amid concerns on food inflations, he said that with the healthy progress of the southwest monsoon and healthy Kharif sowing, food inflation outlook could become more favourable. “However, we need to remain watchful of forces impacting inflation playout. The balance between growth and inflation is well poised,” Das added. 

The area under cultivation in the 2024-25 kharif season has increased by 10.3 percent year-on-year (YoY) reaching 57.5 million hectares. At 57.5 million hectares or 53 percent of the normal sown area, the combined sown area of key kharif crops such as paddy, pulses, oilseeds, sugarcane and cotton, is up 10.3 percent YoY, according to data from the agriculture ministry. 

The central bank governor also stressed on improving female labour force participation in India as it is lower than global average.