Buoyant domestic demand and higher capacity utilisation in the manufacturing sector has led the Reserve Bank of India (RBI) to up its GDP growth projection in FY24 to 7% from 6.5% earlier.

RBI Governor Shaktikanta Das, however, flagged protracted geopolitical turmoil and global economic fragmentation as risks to the growth outlook.

The RBI kept the repo rate unchanged at 6.5% in its bi-monthly monetary policy announced today.

The growth in the first, second and third quarters of the next fiscal is estimated at 6.7%, 6.5% and 6.4%, respectively.

The RBI's GDP growth rate forecast stands at 7% in FY24, with Q3FY24 and Q4FY24 at 6.5% and 6%, respectively.

The Indian economy rose by 7.2% in the 2022-23 fiscal ended March 2023.

The country's real GDP grew 7.8% and 7.6% year-on-year in the June and September quarters, up from 6.1% in the March quarter.

The central bank's projection is significantly higher than forecasts by international agencies.

The IMF, World Bank, ADB and Fitch expect India's GDP to expand 6.3% in the current fiscal, while S&P expects growth to be 6.4% in the current fiscal.

The RBI said the buoyancy in public sector capex, above-average capacity utilisation in manufacturing and domestic demand will help boost growth.

The total flow of resources to the commercial sector stood at Rs 17.6 lakh crore during the current fiscal, significantly higher than Rs 14.5 lakh crore last year.

Despite weakness in external demand, exports were positive in October. Private consumption should gain from rural demand, manufacturing and buoyancy in services. The healthy balance sheet of corporate, business optimism and government infrastructure spending will boost public sector capex, Das said.