The State Bank of India (SBI) has forecast India’s GDP growth at 6.3% for FY25, lower than the Reserve Bank of India’s (RBI) projection of 6.6%, according to its latest report.
The average growth for the first two quarters of FY25 now stands at 6.05%. This forecast follows the RBI’s recent downgrade of its real GDP growth projection for FY25 from 7.2% to 6.6% during its latest Monetary Policy Committee (MPC) meeting, citing balanced risks to the economy.
The report said, “We believe that GDP growth for FY25 will be lower than the RBI’s estimate, and we are pegging it at 6.3% for FY25.”
This marks the first instance in five years where the RBI initially revised its growth estimate upward—from 7.0% to 7.2%—only to lower it later. In earlier years, such adjustments typically followed a consistent pattern of downward revisions. For example, growth forecasts for FY22 and FY23 were downgraded by an average of 90 basis points (bps). The current downward revision to 6.6% for FY25 reflects the RBI’s acknowledgment of potentially missing earlier projections by a significant margin.
The report added, “Such a downward revision in growth forecasts is not new, as in FY22 and FY23, growth projections were downgraded by an average of 90 basis points.”
Meanwhile, the RBI announced a reduction in the cash reserve ratio (CRR) by 50 basis points, to be implemented in two phases. The CRR will be reduced by 25 bps each, effective December 14 and December 28, 2024, respectively, bringing it down to 4% of net demand and time liabilities (NDTL).
This measure is expected to inject Rs 1.16 lakh crore into the banking system, potentially easing liquidity constraints in the coming months. However, the report suggests that while the CRR reduction may not directly influence deposit or lending rates, it could positively impact banks’ net interest margins (NIM) by a modest 3-4 bps.
The report also points out growing caution in growth forecasts amid global and domestic economic challenges. While the banking sector may experience minor benefits from the CRR cut, the lowered GDP estimate underscores the need for continued vigilance in monitoring economic developments.
(Ani)