New Delhi, December 7: The State Bank of India (SBI) has revised India’s GDP growth projection for FY25 to 6.3%, lower than the Reserve Bank of India’s (RBI) estimate of 6.6%, according to its latest report. This follows the RBI’s decision to sharply lower its own forecast from an earlier 7.2%, citing balanced risks to the economy.
SBI’s Growth Outlook
SBI’s report highlights cautious optimism:
"We believe that GDP growth for FY25 will be lower than the RBI's estimate, and we are pegging the GDP growth at 6.3% for FY25," the report stated.
The average growth for the first two quarters of FY25 now stands at 6.05%.
RBI’s Historic Revisions
This marks the first instance in five years where the RBI initially revised its GDP growth estimate upward, only to lower it significantly later. Past trends have shown consistent downward revisions:
- For FY22 and FY23, growth forecasts were downgraded by an average of 90 basis points (bps).
- The recent downward adjustment to 6.6% for FY25 signals the RBI’s acknowledgment of potential challenges in meeting earlier projections.
Impact of CRR Reduction
The RBI also announced a 50 bps reduction in the cash reserve ratio (CRR) in two phases:
- 25 bps effective December 14, 2024.
- 25 bps effective December 28, 2024.
This will bring the CRR to 4% of net demand and time liabilities (NDTL) and inject an estimated ₹1.16 lakh crore into the banking system, potentially easing liquidity constraints.
Sectoral Impact
The report suggests that while the CRR cut may not directly impact deposit or lending rates, it could modestly boost banks’ net interest margins (NIM) by 3-4 bps.
Global and Domestic Challenges
SBI’s downward revision reflects growing caution amid:
- Global economic headwinds.
- Domestic factors, including inflationary pressures and slower-than-expected recovery in key sectors.
The report underscores the need for vigilance in monitoring economic trends as policy adjustments unfold.
