RBI raises GDP growth forecast to 7%, keeps policy rate unchanged

Sandeep Dikshit

New Delhi, December 8

The RBI on Friday raised the GDP growth projection for the current fiscal to 7% from its earlier forecast of 6.5% due to buoyant domestic demand and higher capacity utilisation in the manufacturing sector.

Hikes limit for upi transactions

• The central bank has also raised the limit for UPI transactions to hospitals and educational institutions from Rs 1 lakh currently to Rs 5 lakh
• It also proposed enhanced limits for making e-payments of recurring nature to Rs 1 lakh per transaction from the present Rs 15,000
• This will cover recurring payments to mutual funds, insurance premia and credit card repayments

The RBI kept key policy rate (lending rate) unchanged at 6.5% for the fifth consecutive time, a move welcomed by top Finance Ministry officials and corporates, barring the real estate segment.

The RBI’s Monetary Policy Committee voted to maintain the benchmark repurchase rate at 6.5% and all but one member voted to maintain “withdrawal of accommodation” which means rates will not be eased in the near future.

In the midst of bullish expectations, RBI Governor Shaktikanta Das said continued geopolitical turmoil and global economic fragmentation could pose risks to future growth.

On the back of 7.8% and 7.6% year-on-year growth in this fiscal’s first two quarters, the RBI hiked the projected growth for 2023-24 fiscal. For the next two quarters, it has forecast growth at 6.5% and 6%, respectively. The GDP growth was 7.2% in the 2022-23 fiscal.

Noting that the total flow of resources to the commercial sector stood at Rs 17.6 lakh crore in the current fiscal, the RBI said growth needs to be sustained by buoyancy in public sector capex and above-average capacity utilisation in manufacturing. The healthy balance sheet of corporates, business optimism and government infrastructure spending will boost public sector capex, noted Das.

High food prices compelled the RBI to forecast retail inflation for the current fiscal at 5.4%, which is above the tolerance ceiling of 4%. “Going ahead, the inflation outlook would be considerably influenced by uncertain food prices. High-frequency food price indicators point to an increase in prices of key vegetables, which may push CPI inflation higher in the near term,” Das said, adding the need is to closely monitor ongoing rabi sowing for wheat, spices and pulses.