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India’s GDP growth rate will moderate to 6.3% in 2024, political uncertainty at risk in election year: Goldman Sachs

Goldman Sachs said in its report on Monday that India’s real GDP growth will decline to 6.3 percent in 2024 from the estimated 6.4 percent for 2023. In the coming calendar year, growth is expected to be driven by government spending due to the upcoming general elections in the first half of the year, the US brokerage firm said in the report. For the second half of the year, the firm said that after the elections, investment growth is expected to pick up again, especially from the private sector.

Regarding the financial year, the brokerage said it estimates the growth rate to increase to 6.5 per cent for the 2024-25 financial year, higher than the 6.2 per cent estimated for the current financial year. The company said this sector has the best potential for structural growth in India, PTI reported. The report said, “We believe GDP growth is likely to remain strong at 6.3 per cent year-on-year in 2024. The country remains vulnerable to potential externalities such as longer rates globally, continued dollar strength and geopolitical uncertainties. “Less sensitive to shocks.” where did it go.

Commenting on the growth outlook, Goldman Sachs said the risks surrounding it are evenly balanced, however, political uncertainty remains a key domestic risk, as the coming year will include elections.

“Election season is already underway with assembly elections in five states, which will be followed by general elections later. The outcome of these elections will be keenly watched by investors from a perspective of economic reforms and/or policy continuity,” the report underlined.

The brokerage further said that it expects headline consumer price inflation to be 5.1 percent in 2024, while the Reserve Bank’s estimate is 4.7 percent. This is still less than the projected 5.7 percent in 2023. “We expect the government to intervene through subsidies or other measures to keep food prices under control in an election year,” the report said.

Commenting about inflation rates, the brokerage said elevated inflation relative to target will restrict monetary easing, and the RBI is expected to reduce rates by about 0.50 per cent to 6 per cent by early 2025, and it is expected to cut rates by around 0.50 per cent. It is expected to be 0.25 percent each in Q4 2024 and Q1 2025.

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