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India's GDP growth may accelerate to 7.2% in FY20: Goldman Sachs

On the concerns surrounding NBFCs, the brokerage said lending by such companies grew sharply in recent times and stood at 26 per cent in third quarter of 2018, which has slipped to 20 per cent in the succeeding quarter, and is expected to slow further.

twitter-logo PTI   New Delhi     Last Updated: June 7, 2019  | 16:25 IST
India's GDP growth may accelerate to 7.2% in FY20: Goldman Sachs
India GDP to accelerate to 7.2%: Goldman Sachs

American brokerage Goldman Sachs Friday pegged the Indian GDP growth to accelerate to 7.2 per cent in 2019-20 on lower oil prices, political stability and removal of infrastructure bottlenecks.

Risks to the estimate, which is higher than the RBI's projection for a 7 per cent growth, are on the "downside" because of the issues in the non-bank lenders, it said.

It can be recalled that the growth had dipped to a nearly five year low of 5.8 per cent for the March quarter at 5.8 per cent, dragging down FY19 growth to 6.8 per cent.

In a report that came a day after the policy review by RBI, in which key rates were cut 0.25 per cent to spur growth, the brokerage said it expects an acceleration in GDP to 7.2 per cent.

"The acceleration is based on our assumption of lower oil prices in FY20, an increase in confidence post the elections once the new government and the cabinet take office, and some easing of infrastructure bottlenecks," it said.

On the concerns surrounding NBFCs, the brokerage said lending by such companies grew sharply in recent times and stood at 26 per cent in third quarter of 2018, which has slipped to 20 per cent in the succeeding quarter, and is expected to slow further.

Regulatory actions proposed by the RBI to tackle the liquidity problems, and the asset liability mismatches will lead to the dip in loan growth by the companies, it said. The RBI is likely to cut rates by a similar 0.25 per cent once more in July-September 2019 as inflation remains within its comfort range, it said.

However, once the growth rises and with it the inflation, the focus will be back on tightening and the Central bank may move with two hikes of 0.25 per cent each in 2020, it said. It can be noted that the RBI had shifted stance of the monetary policy to "accommodative", which was explained as a scenario where there will be no rate hikes.

Also read: RBI's Monetary Policy Committee lowers GDP growth forecast to 7% from 7.2% for FY20

Also read: Indian economy expected to grow 7.5% in 2020, says G20 surveillance note

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