Goldman cuts India's growth estimate; Morgan Stanley sees downside risks

Goldman Sachs has revised lower its growth projections for India after the April-June quarterly gross domestic product readings missed market estimates.

The lower-than-expected growth during April-June created downside risk of 40 basis points to current fiscal year growth estimates, Morgan Stanley said in a note.

India's real GDP growth increased 13.5% year-on-year in the reported quarter, below the 15.2% forecast by economists polled by Reuters.


"The reading was materially below our expectations," said Santanu Sengupta, India economist at Goldman Sachs. Sequentially, GDP growth momentum declined to -3.3% quarter-on-quarter after expanding 0.5% in the Jan-March period, Sengupta pointed out.

"Despite the main drivers of domestic demand coming in line with our expectations, a large drawdown in inventories and statistical discrepancies came as a surprise."

The research house cut the full-year 2022 GDP growth forecast to 7% from 7.6% and also lowered the current fiscal year estimates by 20 basis points from 7.2%.

The slightly weaker-than-expected growth in investments and higher drag from net exports contributed to India's GDP falling short of forecasts, Morgan Stanley's India economist Upasana Chachra said.

There is a downside risk of 40 basis points to our growth estimate of 7.2% for fiscal year 2022-23, she said.