Goldman Sachs Lowers India’s 2024 and 2025 GDP Growth Forecasts

Goldman Sachs has revised India’s GDP growth forecasts for 2024 and 2025, anticipating slower expansion due to reduced government expenditure and other economic factors. The bank now projects a growth rate of 6.7% for 2024 and 6.4% for 2025, down by 20 basis points each from previous estimates. This adjustment follows a significant 35% contraction in government spending during the April-June quarter, which coincided with the general elections.

Factors Influencing the Downgrade

The downgrade is primarily attributed to the central government’s reduction in expenditure and a slower pace of real consumption growth. Additionally, tighter regulations by the Reserve Bank of India (RBI) on unsecured lending by banks have impacted household credit, further affecting economic growth. Despite these challenges, Goldman Sachs expects some offset from potential easing in monetary policy, with the RBI likely to begin an easing cycle in December 2024.

RBI and ICRA Projections

In contrast to Goldman Sachs, the RBI had earlier projected a real GDP growth rate of 7.2% for 2024-25 in its first announcements post-Lok Sabha elections. The RBI’s quarterly projections are slightly adjusted, now estimating growth rates of 7.1% for Q1, 7.2% for Q2, 7.3% for Q3, and 7.2% for Q4. Meanwhile, ICRA anticipates a more conservative 6.0% growth for Q1 FY2025, attributing this to reduced government capital expenditure and lower urban consumer confidence, marking a notable deviation from the RBI’s forecasts.

Key Points: Goldman Sachs Lowers India’s GDP Growth Forecasts

Revised Growth Estimates: Goldman Sachs projects India’s GDP growth at 6.7% for 2024 and 6.4% for 2025, down by 20 basis points each.

Reason for Downgrade: A significant 35% contraction in government expenditure during the April-June quarter influenced the revision.

Economic Challenges: Slower real consumption growth and tighter RBI regulations on unsecured lending are impacting the forecast.

Potential Offset: Expected easing of monetary policy by the RBI, starting December 2024, might mitigate some negative effects.

Contrasting Projections: The RBI forecasts a 7.2% growth rate for 2024-25, while ICRA predicts a lower 6.0% growth for Q1 FY2025.