By State Bank of India (SBI), the country’s largest bank by assets and owned by the government, has revised its GDP growth forecast for FY25 to 6.3%, a figure lower than the Reserve Bank of India’s (RBI) latest projection of 6.6%. SBI’s growth forecast, announced in its latest economic report, highlights concerns over the Indian economy’s growth trajectory, following the RBI’s recent decision to downgrade its own growth estimate from 7.2% to 6.6% at the monetary policy meeting.
The report observed that the average growth rate for the first two quarters of FY25 now stands at 6.05%. It stated, “We believe that GDP growth for FY25 will be lower than the RBI’s estimate, and we are pegging the GDP growth at 6.3%.”
The RBI’s decision to revise its GDP projection downward underscores growing concerns about domestic and global economic challenges. RBI Governor Shaktikanta Das highlighted the economic headwinds, citing weaker-than-expected domestic activity.
GDP downward revisions trend
This revision by RBI marks a departure from the RBI’s earlier stance in FY25 when it had raised the GDP forecast from 7% to 7.2% in its June meeting. Analysts noted that such reversals are not unprecedented. “Such a downward revision in growth forecast is nothing new as in FY22 and FY23, the growth forecasts were downgraded on an average by 90 basis points,” SBI’s report said.
For instance, FY22 and FY23 both witnessed a pattern of downward revisions, reflecting persistent challenges in meeting growth targets. This trend continues in FY25, signaling the need for cautious optimism regarding future projections.
Consumption and employment in India
The deceleration in growth has been accompanied by a slowdown in urban middle-class consumption, traditionally a key driver of India’s economic expansion. Consumers are reportedly cutting back on purchases of both basic necessities and big-ticket items, such as cars, amid falling wages and stubborn inflation.
This trend presents a significant challenge to the government’s ambitious goal of positioning India as the third-largest global economy by 2030. Weak growth complicates efforts to boost job creation, improve living standards, and sustain economic momentum.
“High-frequency indicators suggest that the slowdown in domestic economic activity bottomed out in Q2 FY25 and has since recovered, aided by strong festive demand and a pick-up in rural activities,” Das stated.
India’s GDP growth in Q2 FY25 dropped to 5.4%, marking a seven-quarter low and falling short of the central bank’s earlier projection of 7%. The RBI’s latest monetary policy review also revised inflation expectations upward to 4.8%, reflecting concerns over high food prices.
