India to grow at 5.8 percent next fiscal: Goldman Sachs

January 20th, 2009 - 7:02 pm ICT by IANS  

New Delhi, Jan 20 (IANS) India’s economic growth will fall to 5.8 percent and inflation to one percent in the next fiscal, a Goldman Sachs report released Tuesday said.“The Indian economy will go through a challenging time in 2009. We expect GDP growth to slow to 5.8 percent in FY10 due to rapidly falling external demand and slowing investment demand,” the report said.

“We also expect WPI (wholesale price index) inflation to average 1 percent in FY10, down sharply from an estimated 9 percent in FY09. Our strategists remain underweight on the Indian stock market,” said Tushar Poddar, economist at Goldman Sachs.

The global bank, however, added that rural consumers, the government, falling inflation and low cost housing will provide some downside protection in 2009.

According to the report, “800 million rural consumers across the nation, far removed from the credit crunch, un-leveraged, are benefiting from a decent agricultural crop, and substantial government assistance by way of an agricultural loan waiver, employment guarantees, and large investments in rural infrastructure,” will be a key driver of growth in 2009.

“The government will take centre-stage in 2009, with its spending growth far exceeding that of other sectors in the economy,” said Pranjul Bhandari, Goldman Sachs economist who co-authored the report.

“The expenditures will also be boosted by India-Pakistan tensions, which look certain to aid defence and security spending and upcoming general elections - the largest democratic exercise in history,” Bhandari added.

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