India's FY23 GDP growth could be above 7%: RBI governor

Reserve Bank of India governor Shaktikanta Das today said India's gross domestic product (GDP) growth for the financial year 2022-23 could be above the 7% estimate, aided by sustained momentum in economic activity during the fourth quarter.

"It will not be a surprise if the GDP growth of last year comes slightly above 7%," Das says at the Confederation of Indian Industry (CII) Annual Session 2023.

"All the economic indicators in the Q4 of last financial year show that economic activity sustained momentum," Das says adding that high-frequency indicators also maintained momentum.

The second advance estimate released by the National Statistical Office (NSO) in February pegged India's real GDP growth at 7% in 2022-23.

For the financial year 2023-24, the RBI in April marginally hiked its GDP forecast to 6.5% from 6.4% projected earlier.

"We derive confidence at this point of time from the fact that agriculture has done well and we are assuming a normal monsoon. The services sector continues to perform very well. Although merchandise decelerated last year, the services sector exports that have done last year," says the RBI governor.

The capital expenditure and the infrastructure spending by the government have also picked up with large provisions in the Budget for capex by the government, he adds.

There is evidence of a revival of private investments in certain sectors, particularly steel and cement, says Das, adding that capacity utilisation in the manufacturing sector is at a robust 75%. Credit off-take at banks is also quite resilient at 15.5%, Das says.

"These are the upsides to domestic growth which gives us the confidence that India will be able to record 6.5% growth in FY24," the central bank governor says.

However, there are downside risks, geopolitical uncertainties and the drag from merchandise exports because world trade seems to be contracting, Das warns.

"On the agricultural front, there is a forecast of El Nino and we have to see if it actually happens and if it happens, then how intense it is," he cautions. "Only time will tell to what extent it affects our economy."

While retail inflation hit an 18-month low of 4.7% in April, Das expects the next inflation print to be lower.

On the monetary policy committee's decision to pause the repo rate, Das says taking a pause on the repo rate is not in his hand, it all depends on the situation on the ground. "I am driven by what's happening on the ground, what is the outlook, what are the trends, how is the inflation build-up," he says, urging the audience to read this as a 'pivot' not as a 'pause'.

"The global economy is facing headwinds from the lingering geopolitical conflict, elevated inflationary pressures from across countries, and tighter financial conditions on the back of monetary policy tightening by major central banks across the world," Das says.

"We are living in a highly fragmented world where access and availability of technology in a seamless manner has become a challenge. So, it is important for the industry to work out access to that technology and as a country, we need to invest more in technology because the future belongs to technology," he adds.

Das assured business leaders that the RBI will ensure that adequate liquidity is made available for meeting the productive requirements of the economy.

In April, the International Monetary Fund (IMF) slashed India's GDP growth forecast to 5.9% for 2023-24, down 20 basis points compared with 6.1% projected earlier. The World Bank too has lowered the country's GDP growth estimate to 6.3% for FY24 from 6.6% citing lower consumption growth and challenging external conditions. Asian Development Bank (ADB) also revised its forecast for India's GDP growth to 6.4% for FY24. According to the United Nations, India's GDP is expected to expand by 5.8% in the calendar year 2023 and 6.7% in 2024, aided by resilient domestic demand.