Saturday 21 / December / 2024
New Delhi: India, a rapidly growing economy and one of the world’s most populous countries, has long been viewed as a key player in the global economic landscape.
Its robust domestic consumption, diverse industries, and favourable demographic trends have made it one of the most attractive markets for investors worldwide.
As the world enters a period of heightened uncertainty due to a shifting geopolitical landscape, including new trade policies from the United States under President-elect Donald Trump, economists at Goldman Sachs Research have forecast that India’s economy will remain relatively insulated against global shocks over the coming year.
However, Goldman Sachs said India's strong long-term structural growth story remains intact, driven by favorable demographics and stable governance. It is also relatively more insulated against global shocks.
In 2025, it believes India will likely be a relatively insulated economy from global shocks emanating out of a potential trade war between the US and China.
Goldman Sachs forecast India's headline inflation at 4.2 per cent (average) in 2025 with food inflation at 4.6 per cent.
"Food supply shocks due to weather-related disruptions remain the key risk to this view," said Goldman Sachs, in a latest report titled 'India 2025 outlook: Standing firm in an uncertain world'.
Elevated and volatile food inflation, mainly driven by vegetable prices due to weather shocks, has kept the RBI from easing monetary policy.
India's retail inflation was at 6.21 per cent in October, breaching the Reserve Bank of India's 6 per cent upper tolerance level.
Goldman Sachs pushed back its forecast for the start of repo rate easing by the RBI to first quarter of 2025 but continue to expect only a 50 basis points cumulative cuts by mid-year.
The RBI has kept the repo rate elevated at 6.5 per cent to keep inflation contained. The repo rate is the rate of interest at which the RBI lends to other banks.
"While the cyclical growth slowdown calls for easier monetary conditions in our view, the "stronger dollar" scenario will mean the RBI will likely proceed cautiously," said Goldman Sachs.
On the Rupee exchange rate front, the cushion from external shocks should allow the Rupee to outperform its regional partners. Near term, in the face of a stronger dollar, Goldman Sachs expects the Rupee versus Dollar rate to depreciate modestly to 85.5 - 86 over the next 3-6 months, but to remain stable thereafter.
At present, Rupee is pegged around 84.40 per US dollar.
