Goldman Sachs ups Indian GDP forecast for next fiscal

11 Aug 2009

1

Global investment banking firm Goldman Sachs Group Inc has raised India's GDP growth forecast to 7.8 per cent for fiscal for 2010-2011 from the earlier 6.6 per cent due to an improved investment outlook, better external environment and a recovery in consumption demand.

But it kept its growth estimate for the current year ending March 2010 at 5.8 per cent, saying in a note released on Monday that a poor monsoon and the consequent negative impact on rural demand in the near term ''takes away the upside from a large loosening of financial conditions".

Giving reasons for ''significantly'' raising its FY 11 GDP growth forecast from 6.6 per cent to 7.8 per cent, it cited a much improved investment outlook, especially for infrastructure. Revival of capital expenditure plans in power, roads and energy, among other sectors, due to better credit availability, has brightened prospects, it said.

It also attributed the improved forecast to several Indian companies raising capital through qualified institutional placements.

"A low base in agriculture from FY 10 also contributes to our above consensus growth expectations," it added.

Goldman's fiscal year target for wholesale price index-based inflation as of end-FY10 is 6.5 per cent with an upside risk, and expects the central bank to tighten policy rates by 300 basis points in calendar year 2010.

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