New Delhi: Goldman Sachs on Friday raised India’s GDP growth forecast for calendar year 2023 by 30 basis points to 6.3%, citing a rise in exports. The earlier forecast was made in November, which showed that Indian economy will grow at 5.9%.
“There are pockets of strength in services demand — Services PMI clocked a 13-year high of 62.0, domestic air passenger traffic exceeded pre-pandemic levels and services exports have held up despite a slowdown in global growth," said Santanu Sengupta, India economist at Goldman Sachs.
Private sector investment demand has been muted in recent months. But, sequential growth in government expenditure is expected to come in stronger than earlier expected, given spending trends in January and February, said Sengupta.
Goldman Sachs has pegged GDP growth for the Jan-March 2023 quarter at 4.9%, 6.5% for April-June, 5.9% for July-September and 8.1% for October-December.
Goldman Sachs expects a strong trend in services exports, while the trend of lower merchandise imports is likely to continue, leading to a net export boost in 2023.
Real exports may grow above 4% year-on-year, while flat real import growth may be seen in 2023, it said.
However, Goldman Sachs lowered the country’s investment growth forecast to 7.9% year-on-year in the calendar year 2023, compared to 9% year-on-year earlier.
The central government is currently leading most of the capex push for the economy, while private sector investment remains tepid, it said.
Goldman Sachs expects a pick-up in government expenditure in the second half of fiscal 2023–2024 before the general elections in 2024.
Goldman Sachs stressed the “pockets of strength" in service demand, as the services PMI clocked a 13-year high of 62, domestic air passenger traffic exceeded pre-pandemic levels, and service exports held up despite a slowdown in global growth.
But the demand for private sector investment, the brokerage said, has remained muted, as seen by a slowdown in industrial credit growth, led by large industries, in recent months.
In contrast, the Reserve Bank of India has projected GDP growth at 7.8% in April-June, 6.2% in July-September, 6.1% in October-December and 5.9% in Jan-March of 2024, taking the overall GDP growth in 2023-24 to 6.5%.
The National Statistical Organisation (NSO) is scheduled to release the provisional estimate for the GDP growth for the fourth quarter as well for the fiscal 2022-23 on May 31.
Icra estimates the services gross value added (GVA) year-on-year growth to have risen mildly to about 6.4% in Q4 FY23 from 6.2% in Q3 FY23.
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Published: 26 May 2023, 10:23 PM IST
As a seasoned economic analyst with a keen eye on global financial trends, I can provide valuable insights into the recent update on India's GDP growth forecast by Goldman Sachs. My extensive background in economic analysis and forecasting enables me to dissect the intricacies of the report and shed light on the factors influencing the projections.
Goldman Sachs, a reputable financial institution, has revised its GDP growth forecast for India in the calendar year 2023, increasing it by 30 basis points to 6.3%. This upward revision is primarily attributed to a surge in exports, showcasing the immediate impact of economic indicators on growth predictions. Now, let's delve into the key concepts and components mentioned in the article:
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GDP Growth Forecasts:
- The initial GDP growth forecast in November was 5.9%, but it has been revised upward to 6.3% for the calendar year 2023 by Goldman Sachs.
- Quarter-wise projections: 4.9% for Jan-March, 6.5% for April-June, 5.9% for July-September, and a robust 8.1% for October-December.
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Factors Driving Growth:
- Services Sector Strength: Noteworthy is the emphasis on the services sector, with Services PMI reaching a 13-year high of 62.0. This indicates robust demand in services, supported by resilient services exports despite a global economic slowdown.
- Air Passenger Traffic: Domestic air passenger traffic has exceeded pre-pandemic levels, indicating a recovery in the aviation sector.
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Government Expenditure and Private Sector Investment:
- Government Spending: Sequential growth in government expenditure is expected to be stronger than earlier forecasts, with a notable uptick in January and February.
- Private Sector Investment: Private sector investment demand has been subdued, leading to a lowered investment growth forecast of 7.9% for the calendar year 2023.
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Export-Import Dynamics:
- Goldman Sachs anticipates a positive trend in services exports and foresees a continuation of lower merchandise imports, resulting in a net export boost for 2023.
- Real exports are expected to grow above 4% year-on-year, while flat real import growth is predicted for 2023.
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RBI and Alternative Projections:
- The Reserve Bank of India (RBI) projects a different GDP growth trajectory, with estimates at 7.8% in April-June, 6.2% in July-September, 6.1% in October-December, and 5.9% in Jan-March of 2024.
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Other Economic Indicators:
- The National Statistical Organisation (NSO) is scheduled to release the provisional estimate for GDP growth for the fourth quarter and fiscal year 2022-23 on May 31.
- Icra estimates services gross value added (GVA) year-on-year growth to have mildly risen to about 6.4% in Q4 FY23.
This comprehensive analysis underscores the intricate interplay of various economic factors shaping India's growth trajectory and the nuanced perspectives provided by different financial institutions. It's crucial to monitor subsequent data releases and economic indicators for a more nuanced understanding of the evolving economic landscape.
