RBI raises India’s GDP growth forecast to 7%
India’s GDP growth forecast for the current financial year has been raised from 6.5% to 7%, according to Reserve Bank of India (RBI) Governor Shaktikanta Das.
Speaking after the central bank’s monetary policy committee, he said the upgrading of its predictions for GDP comes a week after the India’s growth numbers surprised domestic and global analysts. Government data shows that India’s GDP growth rate was 7.6%, more than 1% higher than RBI’s prediction of 6.5%. Das had previously said that growth is expected to surprise on the upside in this financial year.
The bank governor said: “Indian economy presents a picture of resilience and momentum.” He also pointed towards the strong momentum in manufacturing and services sectors in the current financial year, but warned that global economic conditions remain fragile due to geopolitical tensions and high debt levels.
RBI’s decision to increase its GDP forecast and the positive comments about the economy from Das came as Finance Minister Nirmala Sitharaman told the Indian Parliament that the country has become the second-most sought after destination for manufacturing in the world.
“All sectors are growing significantly. Because of the Make in India programme and PM Modi’s schemes, the manufacturing sector is also significantly contributing to the economy,” Sitharaman said.
Warning over food inflation
Governor Das said the RBI has not changed its inflation forecast for the upcoming quarters. For FY24, the CPI inflation projection remains at 5.4% raised from earlier in 2023 when it was estimated at 5.1%.
In October, retail inflation had slowed to 4.87%, from 5.02% in September. However, food price inflation had not cooled down significantly, with consumer food price index (CFPI) remaining nearly at the same level in October at 6.61%.
Das said in his address: “An increase in vegetable prices may push CPI inflation higher in coming months. The crop output of cereals and pulses needs to be monitored and elevated sugar prices in the world are also a matter of concern.”
RBI’s projections suggest that it expects the CPI inflation print to settle at its target rate of 4% in Q2 FY25.
UK trade talks to resume
India and the UK are set to hold the next round of talks in January 2024 for the proposed free trade agreement (FTA) to resolve remaining issues, India’s commerce ministry has confirmed.
The 13th round of negotiations for the proposed pact was held between September 18 and December 15.
“The UK and India will continue to negotiate towards a comprehensive and ambitious Free Trade Agreement. The fourteenth round of negotiations will take place in January 2024,” the ministry said in a statement.
It added that the negotiations will focus on complex issues including goods, services and investment.
Issues that need to be resolved include duty cuts on electric vehicles and whiskey and the movement of professionals. Talks are also progressing on the proposed bilateral investment treaty (BIT).
India and the UK launched the talks for a free-trade agreement (FTA) in January 2022, and they were set to conclude talks by October 2022. The deadline was missed due to political developments in the UK.
There are 26 chapters in the agreement, which include goods, services, investments and intellectual property rights. The Indian industry is demanding greater access for its skilled professionals from sectors like IT and healthcare in the UK market.
On the other hand, the UK is seeking a significant cut in import duties on goods such as scotch whiskey, automobiles, lamb meat, chocolates and certain confectionary items.
Britain is also looking for more opportunities for UK services in Indian markets in segments like telecommunications, legal and financial services (banking and insurance).
The bilateral trade between India and the UK increased to $20.36 billion (£16 billion) in 2022-23 from $17.5 billion in 2021-22.
