By Anup Roy
Goldman Sachs Group Inc. has cut its India growth forecast by 20 basis points for this year and next, citing a contraction in central government spending.
The bank now expects the country’s economy to expand 6.7% in calendar year 2024 and 6.4% in 2025. The current-year downgrade takes into account a 35% year-on-year contraction in government spending during the April-June quarter that coincided with the weeks-long general election, the bank’s US economist led by Santanu Sengupta wrote in a report on Friday.
India’s growth next year will be hampered by the government’s commitment in the budget to reduce the fiscal deficit below 4.5% of gross domestic product. The expansion will also face headwinds from slower growth in real consumption, driven by a slowdown in household credit due to tighter rules by the Reserve Bank of India to rein in unsecured lending by banks, economists said.
However, looser monetary policy may offset some of the drag on real GDP growth next year as Goldman Sachs expects the RBI to “start its easing cycle in December 2024.”
First published: August 23, 2024 | 11:19 PM IS
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