After the revision, the bank anticipates the Indian economy to grow by 6.7% in 2024 and 6.4% in 2025.
The downgrade for this year reflects a 35% year-on-year drop in government spending during the April-June quarter, which coincided with the general election, according to a report by the bank’s economists led by Santanu Sengupta.
Next year’s growth is expected to be constrained by the government's budget commitment to reduce the fiscal deficit to below 4.5% of GDP.
Growth will face challenges from slower real consumption, driven by a deceleration in household credit as the Reserve Bank of India enforces stricter regulations on unsecured lending by banks.
However, Goldman Sachs said that a more accommodative monetary policy might help mitigate some of the impact on real GDP growth, with expectations that the RBI will begin easing its monetary policy in December 2024.