India's GDP growth will decline in 2024-2025... Goldman Sachs claims

GDP Growth / India's GDP growth will decline in 2024-2025... Goldman Sachs claims

GDP Growth - India's GDP growth will decline in 2024-2025... Goldman Sachs claims

GDP Growth: Goldman Sachs Group has cut the country's GDP forecast for 2024 and 2025 by 20 basis points, taking into account the reduction in the expenditure of the Government of India. Now the bank expects India's economic growth to grow at a rate of 6.7% in 2024 and 6.4% in 2025.

Effect of reduction in government spending

This cut is mainly due to the 35% year-on-year reduction in government spending during the Lok Sabha elections in the April-June quarter. According to Goldman Sachs economist Shantanu Sengupta, the growth rate of 2025 will be affected as the government has set a target of bringing down the fiscal deficit to below 4.5% of GDP in the budget.

Possible impact on the economy

Goldman Sachs economists have warned that RBI's tightening on banks' unsecured lending could lead to a slowdown in domestic debt, which could affect real consumption growth (RCG). This may affect the country's economic growth.

RBI's possible response

However, it is expected that RBI may cut policy rates from December 2024, which may avoid the possible reduction in GDP growth rate of 2025 to some extent.

RBI's GDP forecast

On August 8, the RBI had projected GDP to be 7.2% for the financial year 2024-25, while it expected it to be 7.1% in the first quarter of 2025-26. Apart from this, the Economic Survey Report of 2023-24 had forecast GDP to be between 6.5% to 7.0% for 2024-25.