Economy: Goldman Sachs lowers forecast for India’s GDP growth to 5.9% in 2023
Virendra Pandit
New Delhi: America’s leading multinational investment bank and financial services company Goldman Sachs has lowered its 2023 forecast for India’s economic growth to 5.9 percent, one percent lower than estimated this year.
Citing lower consumer demand because of higher borrowing costs and fading benefits from the reviving post-pandemic Indian economy, it said the South Asian country’s Gross Domestic Product (GDP) is likely to expand only by 5.9 percent in 2023, as against 6.9 percent estimated in 2022, the media reported on Monday.
“Growth will likely be a tale of two halves, with a slower first half as the reopening boost fades, and monetary tightening weighs on domestic demand… In the second half, growth is likely to re-accelerate as global growth recovers, drag from net exports diminishes, and investment cycle picks up.”
India, which successfully climbed out of the pandemic-triggered recession to reclaim the fastest-growing major economy title in FY22, is struggling to repeat that performance while facing challenges like a hawkish US Federal Reserve’s increased lending rates to higher consumer-price growth and widening fiscal and external deficits.
After a lull in the first half of 2023, Goldman Sachs sees a pickup in the investment cycle toward the second half of next year, aiding to India’s growth rebound.
The Indian rupee is among the best-performing currencies in South Asia despite some depreciation against the US dollar, the Goldman analysts said, forecasting headline inflation easing to 6.1 percent in 2023 from an estimated 6.8 percent this year.
Upside risks to inflation mean its central bank, the Reserve Bank of India, might raise the benchmark interest rate by 50 basis points in December 2022 and another 35 basis points in February 2023, to hit a terminal rate of 6.75 percent, as against the current benchmark rate at 5.9 percent.
