Goldman Sachs has lowered India’s GDP forecast by 20 basis points each for this year and the next, citing a contraction in expenditure by the Union government, Bloomberg reported.
The bank now expects the nation’s economy to expand at 6.7 percent in calendar 2024, and 6.4 percent in 2025. The current year’s downgrade factors a 35 percent year-on-year (YoY) contraction in government expenditure during the April-June quarter that coincided with the weeks-long general election, the US bank’s economist led by Santanu Sengupta wrote in a report on August 23, the report added.
Earlier this month, the RBI Monetary Policy Committee (MPC) projected real GDP growth rate for 2024-25 to be 7.2 percent. The central bank had projected real GDP for 2024-25 to be 7.2 percent in the first MPC announcements after the Lok Sabha elections 2024 in June.
RBI projected real GDP for 2024-25 Q1 at 7.1 percent, Q2 at 7.2 percent, Q3 at 7.3 percent, and Q4 at 7.2 percent. It is slightly altered from the previous projections of 7.3 percent, 7.2 percent, 7.3 percent, and 7.2 percent for the four consecutive quarters for this year.
Meanwhile, rating firm ICRA has also projected the YoY expansion of the country’s GDP to fall to a six-quarter low of 6.0 percent in first quarter (Q1) of FY2025 from 7.8 percent in Q4 FY2024 amid a contraction in government capital expenditure and a dip in urban consumer confidence.
The ICRA estimate is much lower than the RBI’s GDP projection. The RBI has projected the real GDP growth for the first quarter of 2024-25 at 7.1 percent.
The first quarter of FY2025 saw a temporary lull in activity in some sectors related to the Parliamentary elections and sluggish government capex, both for the Centre and the states, ICRA said.