The State Bank of India has revised India's GDP growth forecast for FY25 to 6.3%, which is lower than the Reserve Bank of India's projection of 6.6%. The report comes a day after the RBI slashed its real GDP growth projection for the financial year 2025 from 7.2 percent to 6.6% in their latest Monetary Policy Committee (MPC) meeting.

The central bank cited resilience in economic activity, robust government capital expenditure, and easing inflation trends as reasons for optimism, while downgrading its forecast for annual GDP growth rate for the FY 2024-25. RBI highlighted global headwinds, including geopolitical tensions and sluggish external demand, as risks. The RBI Shaktikanta Das had said 'risks evenly balanced' while announcing the revision of GDP forecast after the MPC meeting.

In contrast, the SBI, in its latest "Ecowrap" report forecast attributes the slightly subdued growth outlook to challenges in consumer demand recovery, particularly in rural areas, despite expected support from a normal monsoon. The report also anticipates stable but tempered contributions from private investments and exports and, has urged the RBI to reconsider its growth and liquidity management strategies amid evolving economic challenges.

"This is the first time in the last 5 years that the RBI has first revised the growth estimates upwards and then downwards to 6.6%. This is indeed an implicit recognition by RBI of missing the growth estimates by a wide margin," SBI stated in its report.

"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," it added.

Earlier, the country's GDP growth for the second quarter of 2024-25 had dropped to a seven-quarter low of 5.4%., which is less than RBI's forecast of 7% for the period.

The SBI in its report, emphasized the growing liquidity challenges due to changes like the implementation of the SNA Sparsh system, which centralizes government funds away from commercial banks. This transition, involving funds worth ₹7.5 trillion, has tightened liquidity in the banking system, said the report.

SBI strongly recommended reducing the cash reserve ratio (CRR) to 3%, which would inject an additional ₹2.32 trillion into the system. It also cautioned that while recent measures like CRR cuts could help temporarily, but deeper structural reforms are essential for sustaining growth momentum.

The RBI has maintained a balanced approach, keeping the repo rate steady at 6.5% to manage inflation while fostering growth. Analysts believe that the RBI might adopt a neutral policy stance in early FY25, with limited scope for rate cuts given global uncertainties and inflation control objectives.

Other institutions have varied projections regarding the GDP, with UBS and Kotak Institutional Equities estimating GDP growth at 6.5%-7% and 6.6%, respectively, for FY25.