Goldman Sachs raises GDP growth forecast

Investment banking major Goldman Sachs has raised India’s gross domestic product (GDP) growth forecast to 7.8% for the next fiscal from the earlier projection of 6.6%. The bank said the revision came in wake of a better than expected manufacturing recovery, better external environment and a recovery in the consumption demand.

However, the bank maintained the growth forecast for the current year ending March 2010 at 5.8% as the potential negative impact of the poor monsoon may counter the improved manufacturing outlook and improvement in consumer sentiments.

With regard to substantial increase in next year’s forecast the bank believes that the investment scenario in India, particularly in the infrastructure sector had improved considerably and capital expenditure was seen reviving in sectors like power, roads and energy due to better credit availability.

Indian economy slowed down to a five year low of 5.8% in the last quarter of previous fiscal. However, riding on the fiscal stimulus packages launched by the government and the monetary policy initiatives from the Reserve Bank of India, key sectors like steel, cement and auto and other manufacturing industries have been picking. Analysts expect that while monsoon was likely to impact GDP growth negatively, manufacturing will more than compensate the loss in the farm sector.