RBI’s strictness is becoming a drag on the economy’s growth
The American investment bank Goldman Sachs has expressed concern about India’s growth in its report. What is special is that the company blames the RBI’s strictness in its report. According to Goldman, due to the RBI’s strictness, domestic borrowing can lead to a recession. Growth will therefore slow down and the economy will have to face many challenges. The direct impact of this can be seen in India’s GDP.
What will the growth rate be?
Citing reduced central government spending, Goldman Sachs has cut India’s growth rate by 20 basis points for this year and next. The bank now expects the country’s economy to grow at a rate of 6.7% in calendar year 2024 and 6.4% in 2025. The report, led by US bank economist Shantanu Sengupta, wrote that the downgrade for the current year includes a 35% year-on-year decline in government spending during the April-June quarter, which comes ahead of the week-long general election.
Is RBI strictness becoming a problem?
India’s growth next year will be constrained by the government’s commitment in the Budget to reduce the fiscal deficit below 4.5% of GDP. Economists believe that due to the Reserve Bank of India’s strict norms to control unsecured lending by banks, a slowdown in home lending may be seen.
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However, loose monetary policy could ease some pressure on real GDP growth next year as Goldman Sachs expects the RBI to start a cycle of repo rate hikes in December 2024.
What does the full report say?
The automobile industry has been performing well of late and Goldman Sachs maintains an overweight position on it. It said the industrial sector is expected to benefit from the government’s focus on infrastructure development. The report also focuses on the defensive sector, where telecom companies have benefited from tariff increases and the insurance sector has strengthened. It said institutional investors are positive on Goldman Sachs’ initiatives related to agriculture, green energy, energy security, defence and manufacturing, including the ‘Make in India’ initiative.
India’s economy will be this big in 2075
In its previous report, Goldman Sachs had estimated that India’s economy would reach $52.5 trillion by 2075. What is special is that by that time India will be the second largest economy in the world. According to Goldman Sachs’ estimates, the size of the country’s GDP will increase by about 14 times over the next 50 years.
According to estimates, the current GDP of the country is over 3.75 trillion dollars. It is estimated that in the next 4 years it will rise to 5 trillion rupees. On the other hand, the GDP of the United States will be 51.5 trillion dollars in the year 2075. Which is 1 trillion dollars less than the estimated GDP size of India. What is special is that currently the GDP of the United States is 29 trillion dollars. This means that the growth of the US GDP will be less than double in the next 50 years.
