RBI slashes GDP growth forecast to 6.6% for FY25; Das says slowdown bottomed out in Q2

Reserve Bank of India (RBI) governor Shaktikanta Das on Friday said the real GDP growth for 2024-25 is now projected at 6.6% with Q3 at 6.8% and Q4 at 7.2%. The RBI had earlier forecast the Indian economy to grow at 7.2% for the ongoing fiscal.

Read GDP growth for the first quarter of 2025-26 is projected at 6.9% and the second quarter at 7.3%, Das said while reading the monetary policy statement.

On lower-than-expected GDP growth of 5.4% in the second quarter, Das said this decline in growth was caused mainly by a substantial deceleration in the industrial growth from 7.4% in the first quarter to 2.1% in the second quarter due to subdued performance of manufacturing companies, contraction in mining activity and lower electricity demand.

The weaknesses in the manufacturing sector, however, was not broad-based but was limited to specific sectors such as petroleum products, iron and steel and cement, the RBI governor says.

“Going forward, high frequency indicators available so far suggest that the slowdown in domestic economic activity bottomed out in the second quarter of this year. It has since been aided by strong festive demand and pick up in rural activities. Agricultural growth is supported by healthy Kharif crop production, higher reservoir levels and better rabi sowing. Industrial activity is also expected to normalise and recover from the lows of the previous quarter. The end of the monsoon and the pick up in government capital infrastructure may also provide some impetus to iron and steel sectors,” he says.

Rural demand is trending upwards while urban demand shows some moderation on a high base, according to Das. “Government consumption is improving, investment activity is also expected to improve. On the external front, merchandise exports expanded by 17.2% in October while services exports continued to post a bit growth at 22.3% in October,” he says.