Goldman Sachs upbeat on India's GDP forecast

Goldman Sachs upbeat on India's GDP forecast

At a time when most international institutions and brokerage firms have lowered India's economic growth forecast, Goldman Sachs sounds upbeat saying India's GDP may exceed all expectations in 2013.

Its predictions are backed by some crucial policy decisions taken by the government in the past weeks that were also responded to positively by the stock market and investors.

“…there are lots of policy changes being discussed and the Indian stock market seems to be quite excited about something. We think 2013 Indian GDP will probably exceed expectations, as there are indeed signs that policymakers might also positively surprise," Goldman Sachs Asset Management Chairman Jim O'Neill said in a research paper.

Recently, International Monetary Fund slashed India's growth forecast to 4.9 per cent for 2012 due to low business confidence and sluggish structural reforms. It, however, gave a pat on India’s back for easing restrictions on foreign direct investment in some sectors, privatisations, and lowering fuel subsidies. Last week, Asian Development Bank cut the country’s growth forecast to 5.4 per cent for 2012 from earlier 5.6 per cent. while India's estimated rate fell from 5.6 percent to 5.4 per cent.

Earlier, OECD had also slashed India’s GDP forecast to 4.4 per cent for 2012-13. Moody’s and Standard and Poors too had revised India’s growth projections lowered for this and the next calendar year.

India’s own official estimates suggested, country’s growth for the July-September quarter eased to 5.3 per cent, extending a slowdown since the start of the year, although analysts said a modest recovery was looming. At this juncture, Goldman Sachs’ comments might act as a shot in the arm for the government struggling to revive Indian economy from a slowdown, analysts said.

The global fund house also said that India’s demographics gave it the best potential GDP growth rate.

It, however, said that the inability of Indian government to introduce effective policy changes “is a persistent source of disappointment”.

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