Goldman Sachs has revised its GDP forecast for India, raising it by 10 basis points to 6.7 per cent for 2024. The adjustment comes as the global financial institution anticipates sustained growth momentum and increased fiscal space due to a higher-than-expected dividend transfer from the Reserve Bank of India (RBI).
The updated forecast reflects Goldman Sachs’ confidence in India’s growth trajectory. Andrew Tilton, head of emerging markets economic research at Goldman Sachs, along with co-authors Santanu Sengupta and Arjun Varma, mentioned in a note that investment growth is expected to persist, driven by the additional fiscal capacity. They also predict that core inflation, which is anticipated to bottom out in the April-June period, will stabilise around 4.0 to 4.5 per cent in the latter half of the year.
Despite the positive outlook, the RBI’s Monetary Policy Committee (MPC) members have expressed caution regarding persistent food inflation. They intend to monitor the progress of the monsoon season and summer crop sowing before making any monetary policy changes. Consequently, Goldman Sachs has pushed its forecast for an RBI rate cut to the October-December quarter of 2024, with a projected total easing of 50 basis points through two 25 basis point cuts extending into early 2025.
In addition to its projections for India, Goldman Sachs has updated its expectations for the US Federal Reserve. The financial institution now foresees two rate cuts in 2024, with the first expected in September and the second in December, slightly later than previously anticipated.
The RBI’s latest monthly bulletin, released on 21 May, reinforces a cautious stance on inflation. Co-authored by Deputy Governor Michael Patra, the bulletin projects a durable alignment of inflation with the central bank’s 4 per cent target in the second half of the year. It noted a rise in food inflation to 7.9 per cent in April, driven by higher prices in several categories including cereals, meat, fish, and fruits, although some subgroups such as vegetables and pulses experienced moderated inflation.
The RBI's inflation target remains at 4 per cent, with a tolerance band of 2 percentage points on either side.
