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Informist, Saturday, Aug 24, 2024

 

MUMBAI – Goldman Sachs has scaled down its GDP growth forecast for India for this year and the next by 20 basis points each. It now predicts a 6.7% expansion in 2024 and 6.4% in 2025, and has attributed this downward revision to a contraction in government expenditure.

 

The downward revision for this year is largely due to a 35%-on-year contraction in government spending during the Apr-Jun quarter, a period that coincided with the General Election in the country, according to the report.

 

For 2025, India's GDP growth forecast has been revised downward due to the central government's fiscal consolidation target, and headwinds to real consumption growth from a slowdown in household credit growth following tighter macroprudential norms introduced by the Reserve Bank of India in November 2023 to restrain unsecured lending growth, the report said.

 

"We expect easier monetary policy to offset some of the drag on real GDP growth in 2025 (Jan-Dec) as we expect the RBI to start its easing cycle in December 2024," it said.

 

In its latest monetary policy outcome on Aug 8, the central bank retained its GDP growth projection for the current financial year that started in April at 7.2%. The RBI kept its growth projection for the remaining three quarters unchanged, with Jul-Sep at 7.2%, Oct-Dec at 7.3%, and Jan-Mar at 7.2%.

 

The report said that going forward, a pickup in investment growth is expected, driven by increased capital expenditure by the central government in Jul-Sep and Jan-Mar. This expected boost in government spending is likely to drive higher sequential growth in investment.  End

 

Reported by Vaishali Tyagi

Edited by Avishek Dutta

 

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