In less than six months, the Reserve Bank of India (RBI) has made a second downward revision in real GDP from 7.2 per cent to 7.0 per cent for 2022-23.
The RBI had initially estimated the GDP at 7.8 per cent in its February policy for the current fiscal.
This second downward revision comes close on the heels of a setback in the first quarter GDP, when the actual GDP of 13.5 per cent was substantially lower than the RBI's estimate of 16.2 per cent.
The RBI Governor, however, painted an optimistic picture for future growth. “The investment demand is picking up. The bank credit has also grown 16 per cent year on year,” he said while mentioning improvement in capacity utilisation and high government capex.
The government has allocated Rs 7.5 lakh crore for capital expenditure in the current fiscal 2023-23, which is expected to push private capex.
But the current downward revision in GDP shows the pressures in the domestic economy. In fact, the RBI was completely off the mark in terms of GDP prediction in the first quarter of the current year.
The RBI’s projection for the next three quarter is now pegged at 6.3 per cent in the second quarter, 4.6 per cent in third quarter and 4.6 per cent in the fourth quarter of 2022-23.
In fact, a lot has happened in the last two years from the pandemic to Russia-Ukraine war to global tightening of monetary policy.
The current figure looks more realistic as some other external agencies have also made a downward revision in the recent past. A week ago, the Asian Development Bank (ADB) had cut the country’s GDP to 7.0 per cent for 2022-23. Goldman Sachs also pegged the GDP growth projection at 7 per cent.
A fortnight ago, the global rating agency Fitch has made a sharp downward revision in India's GDP from 7.8 per cent to 7.2 per. cent. In fact, the rating agency predicts that growth will slow further to 6.7 per cent in 2023-24.
Citigroup, too, kept its projection at 6.7 per cent for 2022-23, while the country's largest bank, the State Bank of India‘s (SBI) research unit has estimated the GDP at 6.8 per cent for 2022-23.
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