Goldman Sachs highlighted that India’s real GDP growth will decline marginally to 6.3 per cent in 2024 from the 6.4 per cent estimated for 2023 citing the upcoming Lok Sabha elections.

The next calendar year will be of two halves, wherein the government spending before the upcoming General Elections will be the key driver for growth, while after the elections, it will be the re-acceleration in investment growth, especially from the private sector, the American brokerage firm said.

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It expects the growth to accelerate to 6.5 per cent for FY25 from the 6.2 pc it has projected for the ongoing FY24.

“India has the best structural growth prospects in the region. We believe GDP growth is likely to stay robust at 6.3 pc Y-o-Y in 2024,” the brokerage said.

It added that the country is less sensitive to potential external shocks like longer rates globally, persistent dollar strength and geopolitical uncertainties.

Risks around the growth outlook are evenly balanced but the main domestic risk is emanating from political uncertainty, with elections approaching in the April-June quarter of 2024.

The election season is already underway with Assembly polls in five states, which will be followed by the General Elections later.

Outcomes of these elections will be keenly watched by the investors from the standpoint of economic reforms and/or policy continuity, the report said.

The headline consumer price inflation is likely to come at 5.1 pc for 2024 against 4.7 pc estimated by the Reserve Bank of India.

This will, however, be lower than the 5.7 pc expected in 2023, it added.

“We expect the government to intervene through subsidies or other measures to keep a lid on food prices in an election year,” it said.

The somewhat elevated inflation relative to the target will limit the room for monetary easing, and the RBI will cut rates by only 0.50 per cent to 6 per cent by early 2025, the brokerage said.

“There will be a cut of 0.25 pc each in Q4 2024 and Q1 2025.”

Recently, the S&P Global Ratings said the growth prospects should remain strong over the medium term, with GDP expanding 6-7.1 pc annually in fiscal years 2024-2026.

It is worth highlighting that in the June quarter, India’s real GDP rose 7.8 pc year-on-year up from 6.1 pc in the March quarter. India’s central bank, the Reserve Bank of India has forecast a 6.5 pc economic growth for the 2023-24 and 2024-25 fiscal years.

Recently, Morgan Stanley Research has also said India’s economy will grow at around 6.5 pc for FY2024 and FY2025, citing strong domestic fundamentals.

Also, Moody’s Investor Services retained India’s economic growth at 6.7 pc for 2023, citing the country’s remarkable resilience amid a global slowdown buoyed by solid domestic demand.