Goldman Sachs Lowers India’s Growth Forecast

Goldman Sachs Group Inc. has reduced its growth forecast for India by 20 basis points for both 2024 and 2025, attributing the downgrade to a significant contraction in central government expenditure. The bank now anticipates India’s economy will expand by 6.7% in 2024 and 6.4% in 2025.

Goldman Sachs Group Factors Behind the Downgrade:

The revision comes after a 35% year-on-year contraction in government expenditures during the April-June quarter of 2023, which coincided with India’s general elections.

Goldman Sachs economists, led by Santanu Sengupta, highlighted that this spending contraction is a key factor in the downgraded forecast.

Challenges Ahead:

The forecast for 2025 reflects challenges from the government’s budgetary commitment to reducing the fiscal deficit to below 4.5% of GDP.

Additionally, slower real consumption growth, driven by a slowdown in household credit due to the Reserve Bank of India’s stricter lending rules, is expected to weigh on the economy.

Potential Monetary Policy Easing:

Despite these challenges, Goldman Sachs suggests that easier monetary policy could mitigate some of the drag on GDP growth.

The bank anticipates that the Reserve Bank of India (RBI) may begin an easing cycle in December 2024, which could support the economy.