GDP Forecast down to 5.8% – Goldman Sachs

Goldman Sachs has revised India’s GDP growth numbers for FY09 to 6.7% from 7.5% and for FY10 to 5.8% from 7.0%. GS cited that the larger-than-expected shock to the financial sector over the past couple of months, and its knock-on effects on both domestic and external demand key factors that led to the downgrade.

Expect growth to trough at a quarterly pace of 5.0% in the April-June quarter of FY10, before recovering to 6.6% by end-FY10. Large monetary policy stimulus, prospects of a good agricultural crop supporting rural demand, lower commodity prices, and ongoing infrastructure spending which would limit further downside to growth.

As we move into FY10, political risks will begin to weigh-in and stronger measures required at the macro level will be hit.