Mumbai, Feb 7
The Reserve Bank of India (RBI) has increased its economic growth forecast for the financial year 2025-26 to 6.7%, expecting better farm production and a boost in industrial activities to drive growth.
Inflation Expected to Come Down
The RBI also predicted that inflation (CPI) would fall to 4.4% by the end of this financial year (2024-25) and decline further to 4.2% in 2025-26. This means that prices of essential goods and services are expected to rise at a slower rate, making things more affordable for consumers.
Factors Supporting Growth
RBI Governor Sanjay Malhotra stated that economic growth will be supported by:
- Good agricultural output, especially from the rabi crop (winter crops like wheat).
- A revival in industrial activity, meaning more production and job opportunities.
- Strong household spending, boosted by tax relief announced in the Union Budget 2025-26.
- Increased investments, as companies are using their full production capacity and the government is spending more on infrastructure projects.
However, he also warned that global uncertainties and climate change could pose risks to growth.
GDP Growth Estimates for Each Quarter
For 2025-26, the RBI expects economic growth as follows:
- April-June (Q1): 6.7%
- July-September (Q2): 7.0%
- October-December (Q3): 6.5%
- January-March (Q4): 6.5%
Challenges in the Global Economy
Malhotra pointed out that while the world economy is still growing, it is slower than usual. Some challenges include:
- Uncertain global trade policies
- Ongoing geopolitical tensions (wars, conflicts)
- Rising US dollar value, which affects currency stability in countries like India
The RBI is keeping an eye on the Indian rupee’s value and is ready to take action to control excessive fluctuations in the currency.
India’s Current Economic Performance
For the current financial year (2024-25), the Indian economy is expected to grow at 6.4%, driven by:
- Strong private spending
- Growth in the services sector
- Recovery in the agriculture sector
However, the slow growth in the industrial sector is a challenge.
Inflation Trends and Future Outlook
Inflation came down in November-December 2024 after reaching a peak of 6.2% in October. The drop was mainly due to lower vegetable prices and stable fuel costs.
Looking ahead, inflation is expected to stay under control because of:
- Good monsoon and better crop production
- Lower vegetable prices in winter
- Steady supply of essential goods
However, global market uncertainty, changes in fuel prices, and extreme weather conditions could push inflation up again.
Inflation Projections for 2024-25 and 2025-26
For 2024-25, inflation is expected to be 4.8%, with 4.4% in the last quarter. For 2025-26, inflation is projected at 4.2%, with:
- April-June (Q1): 4.5%
- July-September (Q2): 4.0%
- October-December (Q3): 3.8%
- January-March (Q4): 4.2%
In conclusion, India’s economy is expected to grow steadily in the coming years, supported by strong farm output, rising industrial activity, and household spending. Inflation is likely to remain under control, but risks from global economic conditions and climate factors will need to be watched closely.
