RBI lowers FY25 GDP growth forecast from 7.2% to 6.6%
What's the story
The Reserve Bank of India (RBI) has lowered its growth projection for India's Gross Domestic Product (GDP) for the fiscal year 2025.
The new estimate, announced by Governor Shaktikanta Das, stands at 6.6%, a sharp decline from the earlier forecast of 7.2%.
The change was made during the central bank's rate-setting panel meeting on Friday.
Rate stability
RBI maintains lending rate despite GDP revision
Despite revising the GDP growth forecast downwards, the MPC has opted to keep the benchmark lending rate unchanged at 6.25%.
This comes after India's economic growth unexpectedly slowed to a seven-quarter low of 5.4% in Q2 FY25.
The slowdown was largely attributed to a lagging manufacturing sector and tepid demand amid high inflation and rising interest rates.
Growth comparison
Economic growth for H1 FY25 underperforms previous year
In the first half of FY25, India's GDP grew by 6%, down from the 8.2% growth witnessed in the same period last year.
The gross value added (GVA) grew by a slightly higher 5.6%. However, this too is a decline from its first quarter growth rate of 6.8% in the current fiscal year.
Revised projections
Economists lower full-year growth estimates for India
The slower economic expansion has prompted economists from Goldman Sachs Group and Barclays Plc to lower their full-year growth predictions.
Goldman Sachs's Santanu Sengupta and Arjun Varma have revised their forecast to 6% for the year ending in March 2025, down from their initial estimate of 6.4%.
Other analysts have also aggressively cut their forecasts for the year.
Future outlook
RBI revises GDP projections for upcoming quarters
The RBI has also revised its GDP growth projections for the coming quarters.
For Q3 FY25, the estimate has been lowered to 6.8% from 7.4% and for Q4 FY25, it's now pegged at 7.2% down from an earlier estimate of 7.4%.
The central bank also revised its forecast for Q1 FY26 to 6.9% from the previous estimate of 7.3%.
Governor's remarks
RBI Governor Das comments on economic performance
Speaking at a press briefing, Governor Das said that "Q2 GDP growth turned out to be lower than expected due to subdued performance of manufacturing companies, mining activity."
He added that the slowdown in domestic activity bottomed out in Q2 and has since recovered.
Despite these challenges, he said that the services sector continues to show robust growth with rural demand trending upward.