Goldman Sachs ups India 2023 GDP growth forecast; SBI sees 7.1 per cent growth in FY23

Private sector investment demand has been muted in recent months


Global growth may be slowing, Germany, Europe's largest economy, has technically entered a recession, but prospects for India remain relatively better. Goldman Sachs on Friday raised India's GDP growth forecast for calendar year 2023 by 30 basis points (0.3 per cent) to 6.3 per cent, citing a boost in exports.

"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. 

Globally, central banks will be bracing themselves for several challenges like geopolitical and climate-related shocks, apart from the burden of debt servicing in rising interest rate regimes among other things. But, India is expected to continue its showdown in pursuing a different pathway of zeroing in on drivers of growth, looking for a renewed surge in resilient manufacturing while supporting the services sector to embrace enhanced efficiency, said Soumya Kanti Ghosh, group chief economic adviser at State Bank of India.

"Locally, domestic consumption and investment stand to benefit from stronger prospects for agricultural and allied activities, strengthening business and consumer confidence, and strong credit growth while supply responses and cost conditions are poised to improve as inflationary pressure is easing," said Ghosh. 

SBI's latest Ecowrap report has forecast GDP growth at 5.5 per cent in the January-March quarter, which should take the full year 2022-23 GDP growth to 7.1 per cent. In comparison, the government's National Statistical Office has projected India's real GDP growth at 7 per cent for the 2022-23 financial year.

"India Inc. continues to front lead the economic turnaround while embracing better operational and financial efficiency. In Q4 FY23, around 1,700 listed entities reported top-line growth of 12 per cent, while profit after tax grew by around 19 per cent as compared to the same period the previous year," noted Ghosh. 

Green shoots are also emerging on foreign inflows in capital markets with year-to-date 2023-24 foreign institutional investment (FII) inflows touching $6 billion, he added.

Goldman Sachs, meanwhile, expects a strong trend in services exports and lower merchandise imports to continue. 

"...expect a net export boost in calendar 2023, with real exports growth above 4 per cent year-on-year with flat real imports growth," said Sengupta.

While investments by the private sector remain tepid, he expects government expenditure to pick up in the second half of the 2023-24 financial year before the general elections in mid-2024.

Goldman Sachs has pegged GDP growth for the Jan-March 2023 quarter at 4.9 per cent, 6.5 per cent for April-June, 5.9 per cent for July-September and 8.1 per cent for October-December.

In contrast, the Reserve Bank of India has projected GDP growth at 7.8 per cent in April-June, 6.2 per cent in July-September, 6.1 per cent in October-December and 5.9 per cent in Jan-March of 2024, taking the overall GDP growth in 2023-24 to 6.5 per cent.

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