GDP to Grow at 6.6% in FY25: RBI
The Reserve Bank of India (RBI), in its December 2024 Financial Stability Report (FSR), projected India’s GDP growth at 6.6% for FY25, driven by a revival in rural consumption, increased government spending, and strong services exports. Despite a moderation in GDP growth to 6% in H1 FY25 from 8.2% in H1 FY24, the RBI highlighted India’s economic resilience, supported by sound macroeconomic fundamentals, improved asset quality in banks, and robust financial system indicators. Risks such as moderation in urban demand, global uncertainties, and protective trade policies were noted.
GDP Growth and Drivers: Real GDP growth is forecasted at 6.6% for FY25, aided by government investment, rural demand recovery, and a boost in services exports. Challenges include softness in industrial activity and global spillovers.
Inflation Trends: A bumper kharif harvest and strong rabi prospects are expected to ease foodgrain prices. However, extreme weather events and geopolitical tensions could disrupt inflation dynamics.
Decline in NPAs: The gross non-performing assets (GNPA) ratio of scheduled commercial banks (SCBs) hit a 12-year low of 2.6% in September 2024, while net NPAs dropped to 0.6%, showcasing improved asset quality.
Capital Strength: SCBs maintained strong capital buffers, with the CET1 ratio at 14%, exceeding the regulatory minimum of 8%.
Resilience Under Stress: Macro stress tests confirmed that SCBs, mutual funds, and clearing corporations possess adequate capital buffers to withstand adverse conditions.
Trade and Financial System Resilience: Despite global economic challenges, India’s financial system remains stable. The ratio of international assets to liabilities improved to 76.2% in September 2024, indicating strengthened external accounts.
Geopolitical Risks: Protective trade policies and global fragmentation pose risks to India’s economic outlook, requiring cautious management of external and internal vulnerabilities.
| Key Points | Details |
|---|---|
| Why in news? | RBI projects India’s GDP growth at 6.6% for FY25, citing rural consumption recovery, govt spending, and strong service exports. GNPA ratio of banks fell to 2.6% (12-year low), and inflation dynamics are influenced by a strong Kharif harvest. |
| GDP Growth Projection (FY25) | 6.6% |
| H1 FY25 GDP Growth | 6.0% (decline from 8.2% in H1 FY24) |
| GNPA Ratio (Sept 2024) | 2.6% (12-year low) |
| Net NPA Ratio (Sept 2024) | 0.6% |
| CET1 Ratio (Sept 2024) | 14% (above the 8% regulatory requirement) |
| RBI Governor | Sanjay Malhotra |
| Key Economic Drivers | Rural consumption recovery, increased government investment, and strong services exports |
| Risks Highlighted | Moderation in urban demand, softness in manufacturing, protective trade policies, and global spillovers |
| Inflation Dynamics | Eased by a strong Kharif harvest but threatened by extreme weather events and geopolitical tensions |
| Banking Stability | Improved soundness, strong capital buffers, and reduced non-performing assets |
| International Investment Position (Sept 2024) | Net claims of non-residents declined by $19.8 billion; reserve assets rose by $53.8 billion. |
| GDP Growth in FY24 | H1: 8.2%, H2: 8.1% |
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