The Reserve Bank of India has forecast a pick-up in India’s growth trajectory in the second half of FY25, driven by strong rural demand, an all-time high in foodgrain production and several other factors. According to the central bank’s monthly bulletin, continued government investments in infrastructure are expected to boost economic activity and encourage investment. However, potential global challenges could pose risks to the developing growth and inflation outlook.

The RBI said, “India’s growth trajectory is poised to pick up in the second half of 2024-25, driven primarily by resilience in domestic private consumption demand. Supported by production of foodgrains at record levels, rural demand in particular is gaining momentum.”

The December newsletter included an article on the current state of the world economy, highlighting its resilience with steady growth and contained inflation. According to high-frequency indicators (HFIs) for the third quarter of 2024-25, the Indian economy is showing signs of recovery after a slowdown in momentum in the second quarter. This recovery is attributed to strong festival activity and a continued increase in rural demand.

India’s economic growth rate slowed significantly, hitting its lowest level in almost two years, which has had a negative impact on the overall outlook for the year. The country’s Gross Domestic Product increased by 5.4% in the third quarter of the current fiscal year compared to the same period last year.

The RBI indicated that India’s continued growth prospects are aligned with a more sustainable base, driven by positive climate initiatives such as the promotion of renewable energy, electric vehicles (EVs), green hydrogen and efforts to establish a carbon market