The Reserve Bank of India (RBI) on Tuesday projected India's economic growth to slow down to 6.4 per cent in FY24 from 7 per cent in the current fiscal, citing risks from geopolitical tension and tightening global financial condition.

"The central bank's internal survey says manufacturing, services, and infrastructure sector firms are optimistic about the business outlook," said RBI Governor Shantikanta Das while announcing the bi-monthly monetary policy.

However, protracted geopolitical tension, tightening global financial conditions, and external demands continue as downside risks to the domestic outlook, he noted.

Further, Das said, "The real GDP growth for 2023-24 is projected at 6.4 per cent. In 2023-24, the growth in the June and September quarter is estimated at 7.8 per cent and 6.2 per cent, respectively. However, in the December and March quarter, the GDP growth is estimated at 6 per cent and 5.8 per cent, respectively.

Several economists and rating agencies predict that India's real GDP growth will slow to 6-6.5 per cent in the coming fiscal year.

Furthermore, the RBI forecasts retail inflation to fall to 5.3 per cent in the next fiscal year from 6.5 per cent this year, owing to lower imported inflation, though core inflation remains sticky.

The RBI's inflation forecast for the current fiscal year has been revised down from 6.8 per cent to 6.5 per cent, owing to a steeper-than-expected drop in vegetable prices and the Indian basket of crude at $95 per barrel.

Das added, "Looking ahead, while inflation is expected to moderate in 2023-24, it is likely to rule above the 4% target. The outlook is clouded by continuing uncertainties from geopolitical tensions, global financial market volatility, rising non-oil commodity prices, and volatile crude oil prices. At the same time, economic activity in India is expected to hold up well."

The Indian rupee's low volatility in relation to peer currencies mitigates the impact of imported price pressures and other global spillovers.

Consumer price index-based (CPI) inflation in India fell below the upper tolerance level of 6  per cent in November-December 2022, owing to a sharp drop in vegetable prices. Core inflation, on the other hand, remains sticky, according to the RBI.