Economy projected to grow at 7 percent in 2024-25; geopolitical tensions pose risks to outlook: RBI

The prospects of investment activity remain bright owing to an upturn in the private capex cycle becoming steadily broad-based, persisting and robust government capital expenditure, healthy balance sheets of banks and corporates, rising capacity utilisation, and strengthening business optimism reflected in RBI's surveys.

Improving global growth and trade prospects, coupled with our rising integration in global supply chains, are expected to propel external demand for goods and services, RBI Governor Shaktikanta Das said announcing the Monetary policy, first in the current fiscal 2024-25.

"Taking all these factors into consideration, real GDP growth for 2024-25 is projected at 7.0 per cent with Q1 at 7.1 per cent; Q2 at 6.9 per cent; Q3 at 7.0 per cent; and Q4 also at 7.0 per cent. The risks are evenly balanced," he added.

He, however, cautioned about existing geopolitical tensions and increasing disruptions in trade routes saying “these pose risks to the outlook.”

The RBI, however, expressed confidence in the strength of the Indian economy and said with rural demand catching up, consumption is expected to support economic growth in 2024-25. Urban consumption stayed buoyant as evident from various indicators.

The resilience in cement production, together with strong growth in steel consumption and production and import of capital goods, augur well for the investment cycle to gain further traction. The total flow of resources to the commercial sector from banks and other sources at Rs 31.2 lakh crore during 2023-24 is significantly higher than that of last year (Rs 26.4 lakh crore).

External demand improved in February with exports registering double digit expansion. Trade deficit, however, widened in February as imports also accelerated.

Going forward, the outlook for agriculture and rural activity appears bright, with a good Rabi wheat crop and improved prospects of Kharif crops, due to expected normal Southwest monsoon.