The monetary policy committee (MPC), led by Reserve Bank of India (RBI) Governor Shaktikanta Das has revised India's GDP (Gross Domestic Product) forecast downward to 7.2% for FY 22-23. The current forecast is lower than the previous real GDP forecast of 7.8% for FY23.

Das, during his press briefing on the MPC policy announcement, said the real GDP growth is expected to rise to 16.2% in Q1 FY23; 6.2% in Q2 FY23; 4.1% in Q3 FY23 and 4% in Q4 FY23.

The RBI's GDP forecast is in line with the finance ministry's assessment, which on Thursday said that persistent high crude oil prices for a long time may come in the way of 8% GDP growth in FY23. The ministry, however, was hopeful of the resilience in the Indian economy on the back of the government’s thrust on infrastructure and the improved corporate profitability.

The second advance estimates for 2021-22 released by the National Statistical Office (NSO) on February 28, 2022, had placed India’s real GDP growth at 8.9%, 1.8% above the pre-pandemic (2019-20) level. On the supply side, real gross value added (GVA) rose by 8.3 per cent in 2021-22, with its major components, including services, exceeding pre-pandemic levels. GDP growth in Q3 FY22 decelerated to 5.4%.

"With the ebbing of the third wave and expanding vaccination coverage, the pick-up in contact-intensive services and urban demand is expected to be sustained. The government’s thrust on capital expenditure coupled with initiatives such as the production linked incentive (PLI) scheme should bolster private investment activity, amidst improving capacity utilisation, deleveraged corporate balance sheets, higher offtake of bank credit and congenial financial conditions," the RBI said.

The crucial MPC meeting comes in the wake global oil crisis and the Russia-Ukraine war. Rising inflation and increasing commidity prices.

The six-member MPC committee unanimously decided to keep the repo rate unchanged at 4%, while also maintaining the status quo on the reverse repo rate, marking the 11th straight meeting where the key policy rates have been left unchanged. The monetary policy committee also retained its "accommodative" stance.

On the inflation front, the RBI sharply increased its inflation forecast to 5.7% in the financial year 2022-23 from its earlier forecast of 4.5%.

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