The Reserve Bank of India (RBI) has revised its GDP growth forecast for India for second quarter of fiscal year 2024-25. The central bank has lowered the GDP growth prediction to 6.8%, a 20 basis point reduction. “Our economic activity index, based on a range of high frequency indicators, projects GDP growth at 6.8% in Q2:2024-25,” the RBI noted.

RBI Governor Shaktikanta Das had earlier predicted a GDP growth of 7% for the second quarter. The prediction was made during the October monetary policy meeting.

“The global economy has remained resilient and is expected to maintain stable momentum over the rest of the year, amidst downside risks from intensifying geopolitical conflicts,” said the RBI bulletin. Despite global geopolitical uncertainties, India’s economic growth prospects remain resilient, underpinned by strong domestic drivers, said RBI.

RBI Lowers Growth Prediction: What Led To This?

Certain high-frequency indicators led to a deceleration in economic momentum during the second quarter of FY 2024-25. The slowdown is partially attributed to exceptional factors, including unprecedented rainfall in August and September, and the ‘Pitru Paksha’, said RBI. Consequently, key economic indicators experienced declines, including GST revenues, automobile sales, bank credit expansion, merchandise exports and manufacturing PMI.

Global factors, such as, geopolitical tensions, economic uncertainty, dollar index fluctuations and declining interest rates might also have added up to the trend.

Recently, RBI in its 51st Monetary Policy Committee (MPC) meeting, held on 7, 8 and 9 October kept the Repo Rate unchanged at 6.5%. This was the tenth straight time when these rates were unchanged. However, RBI changed its monetary policy stance of ‘withdrawal of accommodation’ to ‘neutral’. Notably, RBI had projected real GDP of the country to grow at 7.2% rate in whole FY 2024-25.