The State Bank of India (SBI) has projected that India’s gross domestic product (GDP) will grow at 6.3% during the current financial year (FY25), lower than the Reserve Bank of India’s (RBI) forecast of 6.6%, which was revised upward from 7.2% earlier.
“We believe GDP growth for FY25 will be lower than the RBI forecast and are pegging it at 6.3%,” SBI said.
On Friday, RBI governor Shaktikanta Das announced the central bank’s revised estimate for GDP growth. This came after the country’s economy grew at 5.4% in the July-September quarter of FY25, the lowest growth in seven quarters.
This marked the first time in five years that the RBI revised its growth forecast upwards – in this case from 7% to 7.2% – but later lowered it. While such adjustments were common in previous years, there has been a consistent pattern of downward revisions. However, SBI said the downward forecasts were “nothing new.”
“Such downward revisions are nothing new as forecasts were revised down by an average of 90 basis points (bps) in FY22 and FY23,” its analysis said. Meanwhile, on the RBI’s move to cut the cash reserve ratio (CRR) by 50 bps to 4%, SBI said it expects a “positive but marginal” impact on banks’ net interest margins.
According to the largest private sector lender, “While the reduction in CRR may not directly impact deposit or lending rates, it may positively impact banks’ net interest margins by a marginal 3-4 bps.” The CRR will be reduced in two stages, by 25 bps in each stage.
These cuts will be effective on December 14 and 28 and the move is expected to infuse Rs 1.16 lakh crore into the banking system.