The Reserve Bank of India (RBI) on Friday retained the projection of real GDP growth at 9.5 per cent for the current fiscal, consisting of 21.4 per cent in the first quarter, 7.3 per cent in the second quarter, 6.3 per cent in the third quarter and 6.1 per cent in the fourth quarter of 2021-22.
Real GDP growth for the first quarter of 2022-23 is projected at 17.2 per cent by RBI.
The central bank's decision to maintain status quo on the real GDP growth for 2021-22 was influenced by the fact that economic activity has begun normalising with the ebbing of the second wave of Coronavirus pandemic and the phased reopening of economy.
At the same time though, it has cautioned that global commodity prices and episodes of financial market volatility, together with vulnerability to new waves of infections are, however, downside risks to economic activity.
RBI Governor Shaktikanta Das in his speech at the conclusion of the three-day Monetary Policy Committee's (MPC) meeting, said that all the three high frequency indicators like consumption, investment and external demand are on the path of traction.
"Further easing of restrictions and increasing coverage of vaccinations are likely to boost private spending on goods and services including travel, tourism and recreational activities, propelling a broad-based recovery in aggregate demand. The robust outlook for agriculture and rural demand would continue to support private consumption," Mr Das said.
Urban demand, he said, is likely to accelerate with recovery in manufacturing and non-contact intensive services, release of pent-up demand and the pace of vaccination. "This is corroborated by encouraging movements in several high frequency indicators like registration of automobiles, electricity consumption, consumer durable sales and hiring of urban workers," he noted.
The results of the July round of the Reserve Bank's consumer confidence survey suggest that one year ahead sentiments returned to optimistic territory from historic lows.
Referring to first quarter results of some major listed entities, the RBI chief said that corporates have been able to maintain their healthy growth in sales, wage growth and profitability, led by information technology firms. This will also support aggregate disposable income of consumers.
Though he said that investment demand is still "anaemic", improving capacity utilisation, rising steel consumption, higher imports of capital goods and the economic packages announced by the Centre are expected to expedite the long awaited economic revival.
"Innovation and working models adopted during the pandemic by businesses will continue to reap efficiency and productivity gains even after the pandemic recedes. This should help trigger a virtuous cycle of investment, employment and growth," he added.