The Reserve Bank of India (RBI) has reduced its GDP growth forecast for India to 6.8% for the second quarter of fiscal 2024-25, a decrease of 20 basis points. In its October bulletin titled "State of the Economy," the RBI attributed this revision to a slackening momentum observed in some high-frequency indicators, which were partially impacted by unusual heavy rainfall in August and September.

This latest forecast is lower than the previous projection of 7% made by RBI Governor Shaktikanta Das during the October monetary policy meeting. Das also anticipated GDP growth of 7.4% for both the third and fourth quarters of the fiscal year. Despite the challenges, the bulletin noted that India's growth outlook remains supported by robust domestic factors, even amidst global geopolitical tensions.

As the festive season approaches, consumption spending is expected to revive, particularly in smaller towns and lower-tier cities. Although high prices have moderated some enthusiasm, consumers are prioritizing discounts, with increased spending anticipated on clothing, electronics, home décor, and jewelry. Initial e-commerce sales may have been modest, but retailers are optimistic about a late-season surge, projecting a 25% increase in consumer spending compared to last year's Dussehra-Diwali period.

The bulletin also highlighted a rise in credit-driven consumption in traditionally cash-dominated rural areas, particularly for two-wheelers and electronics. While credit card transaction volumes have slowed due to lenders exercising caution in unsecured loans, there are encouraging signs for private investment and a potential hiring spree, especially for gig workers during the festival season.

Recent data shows a mixed trend in food prices, with cereals and pulses experiencing moderation, while edible oils have seen a price increase following a recent hike in import duties. The report paints a complex picture of India's economic landscape, balancing caution with optimism as the country heads into a pivotal festive period.