Goldman Sachs slashes India’s GDP forecast for 2023 to 5.9% - Economic Times

The Indian economy which claimed the title of the fastest-growing major economy title in the previous fiscal is likely to lose its momentum in 2023 owing to higher borrowing costs and fading benefits from the Covid pandemic reopening, said Goldman Sachs in a note.

Gross domestic product (GDP) may expand by 5.9% in the calendar year 2023 from an estimated 6.9% this year, Goldman economists led by Andrew Tilton wrote in a report Sunday as per Bloomberg.

“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's GDP grew by 8.7% in 2021-22. Further, the firm expects headline retail inflation to ease to 6.1% next year from an estimated 6.8% this year. Inflation has remained above the Reserve Bank of India’s tolerance band of 6% for the last ten months and is likely to hover over that mark in the coming few months as per experts.

Economies have lost their growth momentum post-Covid-19 as central banks continued to aggressively hike rates in an attempt to curb spiralling inflation. The rate hikes are expected to hit sudden brakes on the growth momentum of advanced economies as well, spurring risks and worries of a global recession. The GDPs of developed economies are also set to take a hit, experts say

Trade data signals more doom

India’s export growth fell sharply in October, when it contracted 16.7% on annual basis from a growth of 4.8% seen in September, pointing to a decline in global demand.

India’s exports saw a contraction for the first time in the post-pandemic phase and the last time exports contracted was back in February 2021. And trade data shows that the Indian economy is sensitive to global demand sentiment as a result, India's GDP rate may also take a hit.

“We expect weakening exports to have important implications for India’s growth. The consistent slowdown across months in core import growth and weak industrial output data suggest that domestic growth momentum peaked in Q2,” Nomura said in a note.

“India’s investment cycle is linked closely to the global growth and export cycles, which is expected to be an additional source of domestic headwind. We expect GDP growth to slow from 7.2% y-o-y in 2022 to a below-consensus 4.7% in 2023,” it added.

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Goldman Sachs slashes India’s GDP forecast for 2023 to 5.9% - Economic Times
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