Confident RBI sees FY24 growth at 7%

livemint.com:

Bank of India (RBI) on Friday said the Indian economy may expand 7% in the current fiscal year against its previous projection of 6.5%, taking comfort from rising rural consumption, increasing capital expenditure, and a slew of high-frequency indicators. Still, it does not expect inflation to cross its estimate of 5.4%, even as growth kicks into high gear in the world’s fifth-largest economy.

As expected, the central bank’s monetary policy committee (MPC) kept the benchmark repo rate unchanged at 6.5% and retained the policy stance at withdrawal of accommodation. Given the lack of surprises on the rate front, the 10-year benchmark bond traded flat, closing 3 basis points higher at 7.27%.

However, the higher GDP projection cheered the stock market, with both benchmark indices touching new records during the day. The RBI attributed its decision to raise the growth outlook to data supporting revival of rural demand, certain high-frequency indicators, capital expenditure by the government and expectations of a pick-up in private capex amid rising capacity utilization.

“India’s gross domestic product (GDP) growth remains resilient and robust as reflected in our projection of 7% growth in the current year," governor Shaktikanta Das told reporters after the MPC meeting. Das pointed out the 6.4% rural volume growth in fast-moving consumer goods in the second quarter, and the 20.7% jump in two-wheeler sales in the 42-day festive period across October and November as signs of rural recovery.

He added that demand for work under the national rural job guarantee scheme fell 4.6% in November, its first decline this financial year. Falling demand for guaranteed 100-day work under the Mahatma Gandhi National Rural Employment Guarantee