The Reserve Bank of India’s forward-looking surveys indicate sustained economic growth till FY25, with real gross fixed capital formation (GFCF) expected to rise to 7.4 per cent in FY25 from 6.8 per cent in FY24, as per projections by 39 economists.
Consumer confidence in the domestic economy has been improving since the pandemic even as households inflation expectations are seeing normalising over the course of the current financial year.
However, merchandise exports are expected to decline 2.9 per cent and imports by 4.0 per cent, in US dollar terms, during FY24.
In turn, exports are likely to grow 8.3 per cent and imports 7.8 per cent in FY25, per the results of the 82nd Survey of Professional Forecasters on Macroeconomic Indicators.
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Accordingly, experts project current account deficit (CAD) at 1.5 per cent of GDP in FY24, and 1.6 per cent in FY25.
Real GDP (gross domestic product) growth forecast for FY24 was unchanged at 6.0 per cent, and is expected to grow 6.4 per cent in FY25. Forecasts for FY24 GDP growth were in the range of 5.3-6.8 per cent and for FY25 between 6.0 and 7.6 per cent.
RBI has pegged GDP growth for FY24 at 6.5 per cent, with Q1 growth seen at 8.0 per cent, Q2 at 6.5 per cent, Q3 at 6.0 per cent, and Q4 at 5.7 per cent.
Improving sentiment
The Consumer Confidence survey showed that both the Future Expectations index (FEI) and the Current Situation Index (CSI) improved from the previous round on the back of improved assessment for all the survey parameters, barring essential spending.
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“With a substantial improvement in May 2023, households’ sentiment on current income inched closer to the neutral zone and they remain fairly optimistic on employment conditions and future earnings over the next one year,” it said.
CPI inflation
Consumer price index (CPI)-based headline inflation is expected at 5.0 per cent for FY24, wherein it is seen at 4.7 per cent in Q1 FY24 and is expected to remain in the range of 4.9-5.3 per cent for the next three quarters thereafter. For FY25, CPI inflation is expected at 4.9 per cent.
“CPI inflation, excluding food and beverages, pan, tobacco and intoxicants, and fuel and light, is expected at 5.3 per cent both in Q1 and Q2 FY24, and soften thereafter to 5.2 per cent and 5.1 per cent respectively in the subsequent two quarters,” the survey said.
The RBI has projected CPI inflation at 5.1 per cent for FY24, wherein inflation is seen at 4.6 per cent in Q1 and then in the range of 5.2-5.4 per cent for the next three quarters. Households’ Inflation Expectations Survey showed that the median inflation perception has eased by 10 bps to 8.8 per cent in the latest round.