Big update on India’s GDP, the pace of economy may slow down

Goldman Sachs has reduced the growth rate forecast for India’s GDP. According to a Bloomberg report, Goldman Sachs has cut India’s GDP forecast by 20 basis points for this year and next year, citing a reduction in expenditure by the central government. The bank now expects the country’s economy to grow at 6.7 percent in calendar year 2024 and 6.4 percent in 2025.

The report said that the downgrading of the current year could result in a 35 percent year-on-year (YoY) reduction in government spending during the April-June quarter, which coincides with the week-long general election. The report said that due to this, the growth of India’s economy may be slightly lower than before. However, earlier this month, the RBI MPC had projected the GDP growth rate to be 7.2 percent for the financial year 2024-25.

RBI had also reduced GDP growth forecast
In the first MPC announcement after the Lok Sabha elections 2024 in June, the central bank had projected real GDP at 7.2 per cent for 2024-25. The RBI has projected real GDP at 7.1 per cent for the first quarter of 2024-25, 7.2 per cent in the second quarter, 7.3 per cent in the third quarter and 7.2 per cent in the fourth quarter. This is slightly different from the previous estimate of 7.3 per cent, 7.2 per cent, 7.3 per cent and 7.2 per cent for the four consecutive quarters of this year.

The rating agency also estimated
Meanwhile, rating firm ICRA has also projected that the country’s year-on-year GDP expansion will slow to a six-quarter low of 6.0 per cent in the first quarter of FY25 from 7.8 per cent in the fourth quarter of FY24 amid a slowdown in government capital expenditure and a drop in urban consumer confidence. ICRA’s estimate is much lower than RBI’s GDP estimate. RBI has projected real GDP growth at 7.1 per cent for the first quarter of 2024-25.

ICRA said that the parliamentary elections in the first quarter of FY25 saw a temporary slowdown in activity in some sectors and a slowdown in government capital expenditure for both the Centre and the states. This will reduce India’s GDP growth forecast.