India's GDP growth projections for 2024 and 2025 are lowered by Goldman Sachs due to a decline in government spending: Report

 Goldman Sachs has revised its forecast for India's GDP growth, reducing it by 20 basis points for both the current year and the next, according to a report by Bloomberg. The downward revision comes as a result of a significant reduction in spending by the Union government. 

India's GDP growth projections for 2024 and 2025 are lowered by Goldman Sachs due to a decline in government spending: Report

The investment bank now projects that India's economy will grow by 6.7 percent in 2024 and 6.4 percent in 2025. The lowered forecast for this year takes into account a sharp 35 percent year-on-year decline in government spending during the April to June quarter, which coincided with the general elections, as noted by economists from Goldman Sachs, led by Santanu Sengupta, in their August 23 report.

Earlier in August, the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) estimated the real GDP growth rate for 2024-25 to be higher, at 7.2 percent. The central bank's projections, released after the Lok Sabha elections in June 2024, outlined an expected growth of 7.2 percent for the year, broken down by quarters as follows: 7.1 percent in Q1, 7.2 percent in Q2, 7.3 percent in Q3, and 7.2 percent in Q4. These figures represent a slight adjustment from their previous projections for each quarter, which were 7.3 percent, 7.2 percent, 7.3 percent, and 7.2 percent respectively.

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In contrast, the rating agency ICRA has predicted a more modest growth for India's GDP, expecting it to slow to a six-quarter low of 6.0 percent in the first quarter (Q1) of FY2025, down from 7.8 percent in Q4 FY2024. This anticipated decline is attributed to a reduction in government capital expenditure and a dip in urban consumer confidence. 

ICRA's forecast is significantly lower than the RBI’s, which has estimated a 7.1 percent growth rate for the first quarter of 2024-25. The agency attributed the slower growth in the first quarter of FY2025 to a temporary slowdown in certain sectors influenced by the parliamentary elections and reduced government capital expenditure by both the central and state governments.