Goldman Sachs Group changed its growth forecast for India for the current year and the upcoming one. The bank lowered its expectations for the growth of the Indian economy by 20 basis points for this year and the next, attributing the downgrade to a contraction in central government expenditure.
According to a report by Bloomberg, Goldman Sachs gave a revised growth estimate for India for 2024 calendar year of 6.7 per cent, while its growth projections for 2025 calendar year stood at 6.4 per cent.
The report by the bank written by economists, led by Santanu Sengupta, wrote, “The current year’s downgrade factors a 35% year-on-year contraction in government expenditure during the April-June quarter that coincided with the weeks-long general election.”
The economists states that the country will witness an obstruction in growth next year as the government tries to lower fiscal deficit. Notably, in the recent Budget, the authorities committed to reducing fiscal deficit to below 4.5 per cent of the gross domestic product.
Further, expansion will also be hindered by a weaker growth in real consumption as household credit slows down due to the stringent rules enforced by the Reserve Bank of India. These rules were put in place to keep a tab on unsecured lending by banks.
Goldman Sachs, however, noted that it expects the banking regulator to begin its ‘easing cycle in December 2024’, and this could help manage some of the impact on real GDP growth next year.
Notably, earlier this week, Krishnamurth V Subramanian, ED, IMF, noted that India is expected to maintain a strong average real growth rate of 8 per cent in the coming years. The official said that the country is estimated to grow and become a $55 trillion economy by 2047. The average inflation rate in the economy is expected to hover near 5 per cent, he stated.
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