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Goldman Sachs Projects India's GDP Growth to Slow Down to 6.3% in 2025.

Economy Business | Dated: 29 Nov 2024

Goldman Sachs Group Inc. has projected India's Gross Domestic Product (GDP) to decline to 6.3% Year-on-Year (Y-o-Y) in Calendar Year 2025 (CY25). This projection is based on continued fiscal consolidation and tighter credit growth due to macro-prudential measures taken by the Reserve Bank of India (RBI).

🎯 Key Highlights:

  • - Despite this slow growth projection for CY25, India is expected to remain relatively insulated from potential global economic shocks, such as the United States of America (USA)-China trade war.
  • - It has estimated a 25 basis points (bps) repo rate cut in February 2025, followed by another 25 bps cut in April. This would result in a lower repo rate, i.e., to 6%, and overnight interbank rates to 5.75%, supporting growth while keeping inflation within target.
  • - Goldman Sachs projects India's Current Account Deficit (CAD) to be 1.3% of GDP in CY25, driven by strong services exports. It also expects the USD/INR exchange rate to depreciate to 85.5%-86% in the next 3 to 6 months before stabilizing.

💡 Other Important Facts:

  • (i) According to Goldman Sachs, RBI is most likely to use a cautious approach regarding monetary policy in 2025, given the need to balance domestic economic conditions with global factors like a strong US dollar and trade uncertainties.
  • (ii) Goldman Sachs has projected that headline inflation will average 4.2% Y-o-Y in 2025, decreasing from over 7% in 2024.
  • (iii) Goldman Sachs reports that core inflation has steadily decreased from 5.0% Y-o-Y in CY23 to 3.5% Y-o-Y in CY24. It projects core inflation to reach around the RBI's target of 4% Y-o-Y in CY25, with potential downside risks if Chinese goods overcapacity is redirected to regional markets due to US tariffs.

📚 Test Your Knowledge:

Recently, Goldman Sachs has estimated that India's GDP growth will decline to what percentage in 2025?

Correct Answer: 6.3%

🚀 Quick Recap:

About Goldman Sachs Inc

  • CEO : David M. Solomon
  • Headquarters : New York City