Goldman Sachs forecasts FY15 growth at 5.5 pc, says no political tinge

Earlier this month, the US bank upgraded its outlook for Indian equities, saying the market rally is based on bullish sentiment on BJP's prime ministerial candidate Narendra Modi coming to power in the next general election.

PHOTO: Associated Press PHOTO: Associated Press
After the rap over endorsement of Narendra Modi earlier this month by its equity markets arm, Goldman Sachs refused to attribute anything political to its optimism on the country's growth prospects - of 5.5 per cent GDP - next financial year, saying it does not form or hold political opinions on the topic.

Earlier this month, the US bank, in a report titled 'Modi-fying our View: Raise India to Marketweight,' upgraded its outlook for Indian equities, saying the market rally is based on bullish sentiment on Modi, the BJP's prime ministerial candidate, coming to power in the next general election.

Central ministers responded by asking Goldman to do the job that it is good at and not to make political comments.

"Our view on the economy does not have any political colour to it. Our 5.5 per cent GDP forecast for next fiscal is based on the slight uptick in capital investment and the normal post-election pick-up in growth," Goldman Sachs India chief economist Tushar Poddar said on Thursday.

He was answering a question on whether the 5.5 per cent growth estimate has any so-called Modi effect.

Poddar denied any political bias in the GDP forecast and stuck to his 4.3 per cent estimate for the current financial year, saying growth in the second half will be tepid.

"We are expecting an improvement in capital investment to 3.5 per cent next fiscal from 1.3 per cent this fiscal," Poddar said. "Another enabling factor will be the external sector, which will drive exports. The external sector enablers include the solid growth in the US, much lower fiscal trap across the major economies, US tapering happening by March but still Fed rates remaining at record lows up to 2015 and a stable China, which together will help maintain the country's export momentum."

On the parliamentary elections, he said they are a major area of uncertainty, with a potentially large impact on policy reforms and investor/corporate sentiment in either a positive or negative direction.

Finance Minister P Chidambaram has expressed confidence that the economy will pick up in the second half and record a growth of 5-5.5 per cent in 2013-14.