India’s GDP Growth To Lower Marginally To 6.3% In 2024, Election Year Poses Risk Of Political Uncertainty: Goldman Sachs

The brokerage firm in its report noted that in the upcoming calendar year, the government spending owing to the General Elections in the first half of the year is expected to drive growth.

India is set to witness a nominal reduction in its real GDP growth to 6.3 per cent in 2024 from the 6.4 per cent rate estimated for 2023, Goldman Sachs said in its report on Monday. The American brokerage firm stated in the report that in the upcoming calendar year, the government spending owing to the upcoming General Elections in the first half of the year is expected to drive growth. For the other half of the year, the firm noted that after the elections, investment growth is expected to pick up again, particularly from the private sector. 

Regarding the fiscal year, the brokerage said that it estimates growth to increase to 6.5 per cent for the 2024-25 fiscal year, up from the 6.2 per cent it projected for the current fiscal year. The firm added that India has the best structural growth prospects in the region, reported PTI. “We believe GDP growth is likely to stay robust at 6.3 per cent y-o-y (year-on-year) in 2024. The country is less sensitive to potential external shocks like longer rates globally, persistent dollar strength, and geopolitical uncertainties,” the report stated.

Commenting on the growth outlook, Goldman Sachs stated that the risks around it are evenly balanced, however, political uncertainty remained a major domestic risk, as the coming year will include elections.

“The election season is already underway with Assembly polls in five states, which will be followed by the General Elections later. The outcomes of these elections will be keenly watched by investors from the standpoint of economic reforms and/or policy continuity,” the report underlined. 

The brokerage further said that it expects headline consumer price inflation to stand at 5.1 per cent in 2024, against the Reserve Bank’s estimate of 4.7 per cent. This still stands lower than 5.7 per cent projected in 2023. “We expect the government to intervene through subsidies or other measures to keep a lid on food prices in an election year,” the report added. 

Commenting about the inflation rates, the brokerage said that the increased inflation against the target will restrict monetary easing, and the RBI is expected to lower rates by about 0.50 per cent to 6 per cent by early 2025, and it is hopeful of a cut of 0.25 per cent each in Q4 2024 and Q1 2025.