Mumbai, Feb 7 (NationPress) The Reserve Bank of India (RBI) announced on Friday an increase in the nation’s real GDP growth forecast for 2025-26 to 6.7 percent. This revision is based on expectations of a strong rabi crop yield and a projected rebound in industrial activities, which are anticipated to bolster economic growth moving forward.

Furthermore, the RBI forecasts CPI inflation to decrease to 4.4 percent in the final quarter of the current fiscal year, followed by a further drop to 4.2 percent in 2025-26.

In his remarks, RBI Governor Sanjay Malhotra stated, "Looking forward, positive rabi expectations and an anticipated recovery in industrial activities should facilitate economic growth in 2025-26."

He added, "On the demand side, household consumption is projected to remain strong, supported by tax relief measures in the Union Budget 2025-26."

“Fixed investment is expected to see recovery, driven by higher capacity utilization, strong financial health of institutions and corporations, along with the Government’s ongoing commitment to capital expenditure,” Malhotra emphasized after the monetary policy committee (MPC) meeting.

He also highlighted potential risks to growth from global uncertainties and climate change.

“Considering all these factors, the real GDP growth for 2025-26 is estimated at 6.7 percent, with Q1 at 6.7 percent, Q2 at 7.0 percent, and Q3 and Q4 both at 6.5 percent. The risks are evenly balanced,” the RBI Governor explained.

Previously, in December, the RBI had adjusted its GDP growth outlook to 6.6 percent, down from 7.2 percent.

He noted that the global economy is expanding below historical norms, even though high-frequency indicators indicate resilience amid ongoing growth in world trade. The global economic environment remains challenging, marked by a slow disinflation rate, persistent geopolitical tensions, and policy uncertainties.

Malhotra also pointed out that the strong US dollar is putting pressure on emerging market currencies and increasing volatility in financial markets. He affirmed that the RBI is closely monitoring the rupee's depreciation and is taking necessary measures to stabilize the Indian currency.

“Domestically, according to the First Advance Estimates, real GDP is projected to grow at 6.4 percent (year-on-year) in 2024-25, driven by a rebound in private consumption. On the supply side, growth is supported by the services sector and recovery in agriculture, while sluggish industrial growth poses challenges," he stated.

Robust services exports are expected to continue driving growth. Nonetheless, challenges from geopolitical tensions, protectionist trade strategies, fluctuations in international commodity prices, and financial market uncertainties pose downside risks to the outlook, he added.

The RBI Governor also mentioned that headline inflation decreased sequentially in November-December 2024 from its recent peak of 6.2 percent in October. The decline in headline inflation was primarily driven by moderating food inflation, as vegetable price inflation eased from its October peak. Core inflation remained subdued across various goods and services, and the fuel group is currently experiencing deflation.

Looking ahead, food inflation pressures, barring any supply shocks, are expected to significantly ease due to favorable kharif production, reduced vegetable prices in winter, and promising rabi crop forecasts. Core inflation may rise but is likely to remain moderate.

However, ongoing uncertainties in global financial markets, coupled with fluctuations in energy prices and adverse weather events, present upward risks to the inflation outlook, he added.

Taking all these aspects into account, CPI inflation for 2024-25 is expected to be 4.8 percent, with Q4 at 4.4 percent. Assuming normal monsoon conditions next year, CPI inflation for 2025-26 is projected at 4.2 percent, with Q1 at 4.5 percent, Q2 at 4.0 percent, Q3 at 3.8 percent, and Q4 at 4.2 percent. The risks are evenly balanced.