The Reserve Bank of India (RBI) is projecting a robust GDP growth rate of 7.3% for the first quarter of FY25, demonstrating a continuation of the economic dynamism witnessed in the previous quarter, where GDP surged by 7.8%. RBI Governor Shaktikanta Das, speaking at a business event, emphasized the sustained momentum as evidenced by data up to the third week of June, reflecting unwavering economic activity.
Governor Das expressed confidence in achieving the projected GDP growth, underpinned by favorable macroeconomic conditions. He underscored that there is no indication of a deceleration in this momentum. However, he cautioned against complacency, highlighting the volatile nature of markets and the potential for unforeseen international developments that could disrupt this trajectory. Vigilance and agility, he stressed, are paramount in navigating both domestic and global economic landscapes.
On the external front, the Governor pointed out the commendably low current account deficit (CAD), which stood at 1.2% of GDP over the first three quarters of FY24. The forthcoming figures for Q4FY24 are anticipated to reflect an even lower CAD, potentially bringing the annual figure below 1%. This positive outlook, coupled with a bolstered foreign exchange reserve of $655.8 billion, enhances investor confidence in the stability and resilience of the Indian markets. Das affirmed RBI’s strategy to opportunistically augment these reserves to mitigate market volatility and reassure global investors of India’s capacity to meet its external payment obligations.
Regarding the RBI’s increased gold purchases, Das explained this as a strategic move to diversify India’s foreign exchange reserves. He noted the historical upward trend in gold prices, positioning gold as a reliable hedge against external economic uncertainties. While gold purchases are made judiciously, considering international price fluctuations, this strategy remains a critical component of the RBI’s broader reserve management approach.
In sum, the Reserve Bank of India remains optimistic about maintaining robust GDP growth and economic stability, supported by prudent management of the current account deficit and strategic diversification of foreign exchange reserves. The RBI’s forward-looking approach aims to sustain confidence among global investors while navigating the complexities of an ever-evolving economic environment.