RBI retains GDP Forecast at 9.5%, revises inflation estimate down at 5.3%

The Reserve Bank of India has retained its growth forecast at 9.5% for FY22 while revising down its inflation forecast to 5.3% (from 5.7% earlier) given the lower than expected food inflation momentum.

RBI's in-house model expects it to ease further in FY'22-23 to 4.5-5.2%. But real GDP growth may be lower at 7.8% in the next fiscal.

Inflation pressures are expected to ease in the current quarter. Consumer price indices (CPI) inflation is seen at 5.1% in Q2, 4.5% in Q3 and 5.8% in Q4 of FY22 with risks broadly balanced. It is pegged at 5.3% from 5.7% earlier for FY22 as a whole.


"The CPI headline momentum is moderating with the easing of food prices which, combined with favourable base effects, could bring about a substantial softening in inflation in the near term," Governor Shaktikanta Das said.

Das cautioned that the resurgence of edible oils prices and high global crude oil prices in the recent period are a cause of concern. "Domestic pump prices remain at very high levels. Rising metals and energy prices, acute shortage of key industrial components and high logistics costs are adding to input cost pressures," Das said.

Growth forecast is however maintained at 9.5% in FY22. "The impact of elevated input costs on profit margins, potential global financial and commodity markets volatility and resurgence in Covid-19 infections, however, impart downside risks to the growth outlook," Das said. The economy is expected to clock 7.9% in Q2; 6.8% in Q3; and 6.1% in Q4 of 2021-22. Real GDP growth for Q1:2022-23 is projected at 17.2%.
For 2022-23, RBI's structural model estimates indicate real GDP growth at 7.8%, with quarterly growth rates in the range of 5.0-17.2%, assuming restoration of supply chains, a normal monsoon, no major exogenous or policy shocks, and full vaccination.