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Goldman Boosts India GDP Forecast to 7.9 Percent

Goldman Boosts India GDP Forecast to 7.9 Percent

According to global investment firm Goldman Sachs, India’s economy is set to grow by 7.9 percent  between April 2016 and March 2017, accelerating from 7.6 percent in the previous year.

Goldman highlighted the following factors that are expected to support India’s growth in the coming months:

A favorable monsoon — India’s agrarian economy, rural incomes, and consumption depends on good rainfall during the monsoon season. This year rainfall is predicted to be 6% above normal, and rainfall is likely to increase from the beginning of September. This could add 0.6 to 0.9 percentage points to overall gross domestic product (GDP) growth in fiscal 2017, says Goldman.

Agriculture on mountainous terrain

Government employees to get a raise — the Government of India has approved a more than 14 percent increase in salaries and pensions for about 10 million government employees and pensioners, this June. This move will add to the purchasing power of consumers and could see GDP growth get a 0.30 percentage point boost.

Favorable policy mix — India’s fiscal and monetary policy mix is also favorable and it provides a “conducive environment for growth,” reports Goldman. This year’s federal budget has focused on the rural sector, and this could support public capital expenditure.

Progress on reforms — The Government is moving ahead on four key reforms, the tax overhaul system, the bankruptcy code, easing of FDI restrictions and the setting up of a monetary policy committee.

Goldman warned that a faster pace of rate hikes by the U.S. Federal Reserve, concerns over China, and worsening of India’s non-performing loans could potentially derail the economic trajectory, reports CNBC News.

 

 

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