The Reserve Bank of India (RBI) has projected the real GDP growth for 2024-25 at 7.0 per cent, according to its annual report released on Thursday. The projection is attributed to enhanced activities in key sectors such as real estate, renewable energy, and semiconductors.
The RBI emphasized that construction activity, driven by both residential and non-residential real estate demand, is expected to remain robust. Additionally, emerging sectors like renewable energy and semiconductors are poised for significant advancements, bolstered by recent government initiatives.
The report highlighted that the allocations in the Union Budget 2024-25 for semiconductors and display fabs are aimed at positioning India as a global hub for chip and electronics manufacturing. These developments are anticipated to create new employment opportunities, improve labor incomes, and strengthen domestic demand.
Investments are expected to flow into sectors benefiting from the government's production-linked incentives (PLI) schemes. Despite subdued global economic activity and multiple headwinds, the Indian economy has demonstrated impressive growth, with real GDP growth accelerating to 7.6 per cent in the previous year from 7.0 per cent, marking the third consecutive year of 7 per cent or higher growth.
The International Monetary Fund (IMF) recently projected India's growth rate to remain at 6.8 per cent for 2024-25. Meanwhile, S&P Global Ratings has upgraded India's outlook from stable to positive.
The RBI report also noted that easing supply chain pressures, a broad-based softening in core inflation, and early signs of an above-normal southwest monsoon are positive indicators for the inflation outlook in 2024-25. The central bank will use a mix of instruments to manage both frictional and durable liquidity to ensure orderly money market interest rates and preserve financial stability.
Additionally, the central government has extended its financial assistance scheme for states' capital expenditure into 2024-25, with an outlay of Rs 1.3 lakh crore. The budgeted reduction in gross market borrowings from 5.3 per cent of GDP in 2023-24 to 4.3 per cent of GDP in 2024-25 is expected to enhance the flow of funds to the private sector and support private investment.
The digitalization of the tax system has led to a surge in tax collections, with direct tax revenues projected to reach 6.7 per cent of GDP in 2024-25, the highest in three decades. The current account deficit (CAD) is anticipated to remain manageable, supported by a projected rebound in global trade and an increase in India’s share of world remittance receipts from 11.1 per cent in 2019 to an estimated 15.2 per cent in 2024.
The RBI also noted that despite its regulatory measures, the capital and asset quality of banks and non-banking financial companies (NBFCs) remain healthy. However, it warned that several regulatory and supervisory measures will be implemented in 2024-25 to further strengthen financial intermediaries.
