Goldman Sachs expects economic activity in India to remain resilient in 2024, even as elevated headline inflation will prevent the central bank from monetary easing before October next year.
“In FY24, we expect macro economic resilience to continue in India amidst a steady growth at 6.2% year-on-year,” a note by Goldman Sachs stated.
The year will likely be a tale of two halves: pre-elections, government spending will likely be the growth driver, it said. Post elections, investment growth is expected to re-accelerate especially from the private side.
For FY25, GDP growth is estimated at 6.5%.
Repeated supply shocks are likely to keep headline inflation above the target at 5.1% year-on-year on an average in 2024. Government intervention is expected to keep a lid on food inflation, where possible, in an election year, the note stated. Core inflation is expected to only decline to 4.5% year-on-year on an average in 2024, from an estimated 5.1% in 2023, given the food and oil supply shocks and steady growth outlook.
Somewhat elevated inflation will limit the room for monetary easing, according to Goldman Sachs. “We forecast the RBI to stay on hold till Q4 2024 and then cut only 50 basis points cumulatively by early 2025,” it stated.