Goldman Sachs sees India’s growth slowing next year, cuts GDP forecast

Goldman Sachs Group Inc. sees India’s economic growth slowing next year, citing a hit to consumer demand due to higher borrowing costs and fading benefits from post-pandemic reopenings. , while lowering growth forecasts. Goldman said in a report that gross domestic product (GDP) could grow by 5.9% in calendar year 2023 from an estimate of 6.9% this year.

“Growth is likely to be a two-halve story, with a slower first half of the year as push to reopen waning and monetary tightening weigh on domestic demand. In the second half, growth is likely to pick up again as global growth recovers, leading to a decline in net exports and an increase in the investment cycle,” the note said. up in the second half of 2023 will support Indiarecovery growth.

Rising inflation risks mean that the Reserve Bank of India is likely to raise its benchmark interest rate by 50 basis points in December and another 35 basis points in February, to reach a final rate of 6. 75%, Goldman economists wrote. The benchmark rate currently stands at 5.9%.

Global ratings agency Moody’s Investors Service also cut its economic growth forecast for India in 2022 to 7% from 7.7% previously estimated, citing tightening monetary policy, inflation, and inflation. higher, the monsoon is unevenly distributed and global growth slows.

It expects the Reserve Bank of India (RBI) to raise the repo rate by 50 basis points to anchor inflation expectations and support the rupee’s exchange rate.

Annual headline CPI inflation rose to 7.5% in September from below 7.0% in July. However, wholesale price inflation has declined for 4 consecutive months, from a peak of 16, 6% in May down to 10.7% in September.

Moody’s also lowered its growth forecast for 2023 to 4.8% from 5.2% previously estimated. After the deceleration, the agency expects India’s economic growth to recover to 6.4% by 2024. However, the rating agency said India’s underlying growth engine is fundamental was strong, boosted by a recovery in service activity.

On the other hand, the World Bank in October cut its 2022-23 (FY23) real gross domestic product (GDP) growth forecast for India to 6.5%, from its previous estimate of 7. .5%, and warned that spillovers from Russia’s invasion of Ukraine and a tightening of the global currency would weigh on the economic outlook.

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