India's GDP Update: Goldman Sachs has revised its growth rate forecast for India's GDP. According to a Bloomberg report, Goldman Sachs has reduced its GDP forecast for this year and the next by 20 basis points, citing a reduction in central government expenditures.
The bank now expects the Indian economy to grow at a rate of 6.7% in calendar year 2024 and 6.4% in 2025.
The report indicates that the downgrade for the current year is due to a projected 35% year-on-year reduction in government spending during the April-June quarter, coinciding with a week-long general election.
This may result in slightly slower economic growth than previously anticipated. However, earlier this month, the RBI MPC had projected a 7.2% GDP growth rate for the fiscal year 2024-25.
The RBI had also revised its GDP growth forecast. In the first MPC announcement after the June 2024 Lok Sabha elections, the central bank projected a real GDP growth of 7.2% for the fiscal year 2024-25.
The RBI estimated the real GDP growth to be 7.1% in the first quarter, 7.2% in the second quarter, 7.3% in the third quarter, and 7.2% in the fourth quarter. This is slightly different from the previous estimates of 7.3%, 7.2%, 7.3%, and 7.2% for each quarter of this year.
Meanwhile, the rating firm ICRA has projected that due to a reduction in government capital expenditure and a decline in urban consumer confidence, India's GDP growth could drop to 6.0% in the first quarter of fiscal year 2025, marking a six-quarter low.
This is down from 7.8% in the fourth quarter of fiscal year 2024. ICRA's forecast is significantly lower than the RBI's estimate, which predicts a 7.1% real GDP growth for the first quarter of 2024-25.
ICRA noted that the first quarter of fiscal year 2025 might see a temporary slowdown in certain sectors due to parliamentary elections and a decline in government capital expenditure at both the central and state levels. This is expected to contribute to a reduction in India's GDP growth estimate.