The country’s economy is recovering from the slowdown seen in the second quarter, RBI said this

The Reserve Bank of India (RBI) said in its latest bulletin on Tuesday that the country’s economy is recovering from the slowdown seen in the second quarter. It said that the Indian economy is recovering from the slowdown seen in the September quarter, driven by strong festive activity and continued growth in rural demand. According to PTI news, an article on the state of the economy in the December bulletin said that the global economy continues to display resilience with stable growth and soft inflation.

According to the news, high frequency indicators (HFIs) for the third quarter of 2024-25 indicate that the Indian economy is recovering from the slowdown seen in the second quarter, driven by strong festive activity and continued growth in rural demand. The article further states that the growth trajectory is set to pick up in the second half of 2024-25, driven mainly by resilient domestic private consumption demand. The authors said that rural demand is picking up, especially due to record levels of foodgrain production.

Investment is expected to get a further boost

Continued government spending on infrastructure is expected to further boost economic activity and investment. Global headwinds, however, pose risks to the emerging growth and inflation scenario, said the article authored by a team led by RBI Deputy Governor Michael Debabrata Patra. India’s GDP growth rate fell to a seven-quarter low of 5.4 per cent during the July-September period of the current financial year.

This estimate is for the third and fourth quarter

The authors further said that another emerging constraint is the slowing rate of nominal GDP growth, which could hamper fiscal spending, including capital expenditure, to achieve budgetary deficit and loan targets. The article also mentioned that according to estimates based on in-house Dynamic Stochastic General Equilibrium (DSGC), real GDP growth is likely to reach 6.8 per cent and 6.5 per cent in the third and fourth quarters of 2024-25, respectively.

Growth rate forecast for 2025-26

Growth is projected at 6.7 per cent for 2025-26, while headline CPI inflation (retail) is projected to average 3.8 per cent in 2025-26. In the December monetary policy, the RBI had projected GDP growth at 6.6 per cent for 2024-25, with Q3 at 6.8 per cent and Q4 at 7.2 per cent. GDP growth for the April quarter of 2025-26 was projected at 6.9 per cent and Q2 at 7.3 per cent. The RBI said the views expressed in the bulletin are those of the authors and do not represent the views of the central bank.