What TV doesn't, print can't; we deliver.
What TV doesn't, print can't; we deliver.
Goldman Sachs released a report on Tuesday, projecting a slight dip in India’s real GDP growth rate, estimating it to be 6.3 per cent in 2024, a marginal decrease from the 6.4 per cent growth anticipated for 2023.
The report suggests that the economic narrative in the coming year will unfold in two distinct halves.
According to the investment banking giant, the first quarter is likely to see subsidies and transfer payments driving growth, particularly as the country heads into the general elections in the second quarter 2024. Post-elections, a rebound in investment growth, particularly from the private sector, is expected.
“While the government is anticipated to maintain its focus on capital spending, the rate of growth in capital expenditure is likely to slow down next fiscal year in line with the medium-term fiscal consolidation path,” the report notes. The report also underscores potential risks associated with political uncertainty as elections approach in Q2 2024.
Goldman Sachs predicts that inflation will remain above the Reserve Bank of India’s target of 4.0 per cent in 2024 due to repeated supply shocks and stable growth. The forecast indicates headline cost per Consumer Price Index inflation averaging at 5.1 per cent year-on-year in 2024, surpassing both the RBI’s target and consensus forecasts.
The report predicts core inflation to decrease to 4.5 per cent year-on-year in 2024. However, elevated inflation levels may constrain the space for monetary easing, with Goldman Sachs forecasting the RBI to cut only 50 basis points to 6.00 per cent by early 2025.
The report underscores the global and domestic factors influencing India’s economic landscape, anticipating a continued hawkish stance and tight banking system liquidity until the RBI is confident about inflation aligning with the 4.0 per cent target.
Despite challenges, India’s macro-economic resilience has earned recognition, as evidenced by its inclusion in the JP Morgan Government Bond Index-Emergeing Markets Global Diversified Index starting June 2024. This inclusion is expected to attract passive inflows of around $25-30 billion over the scale-in period.
“With India benefiting from regional supply chain diversification, we expect continued direct investment inflows, although capital inflows will likely remain muted globally in a high-interest-rate environment. Overall, we think the current account deficit should be comfortably funded next year,” concludes the Goldman Sachs report.
