India growth to slow to 5.9% in 2023, says Goldman Sachs

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India’s economic growth in 2023 is expected to slow to 5.9%, from 6.9% in 2022, Goldman Sachs said in its India 2023 outlook report.

“Growth will likely be a tale of two halves, with a slower first half as the reopening boost fades, and monetary tightening weighs on domestic demand. In the second half, growth is likely to re-accelerate as global growth recovers, drag from net exports diminishes and investment cycle picks up,” Goldman Sachs said.

As per its forecast headline CPI inflation is likely to decrease to 6.1% in 2023 from 6.8% in 2022 as ‘active government intervention’ would cap food inflation.

“We think core goods inflation has peaked but upside risks to services inflation are likely to keep core inflation sticky around 6% [year-on-year],” it added.

It said the Reserve Bank would likely to increase the repo rate by 50 basis points / 35 bps in December 2022/February 2023 taking the repo rate to 6.75% by February 2023. “We bake in a 25 bp repo rate cut in Q4 2023 if inflation pans out as per our forecasts to reach 5.3% yoy by Q4,” it further said.

Emphasising that India’s current account deficit would remain wide given the export drag from a global slowdown, it said resilient service exports would provide some cushion.

“However, growth capital may continue to chase India, as global firms are looking to diversify sources of supply and India presents an attractive opportunity over the long term,” Goldman Sachs said.

It said policymakers would likely to ease barriers to foreign capital inflows to achieve ‘inclusion in global bond indexes in coming years.’

As per its forecast, the rupee would be at 84 against the U.S. dollar in three months, dip to the 83 level in six months and reach the 82 level over a 12-month horizon.



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