India's growth was expected to be about 6% by Goldman Sachs, lower than the RBI's forecast of 6.5%

India's economic growth is expected to be 6 percent, according to global investment bank Goldman Sachs, which is less than the Reserve Bank of India's (RBI) prediction of 6.5 percent.

Read more : Vegetable price reductions caused India’s retail inflation to decline more than anticipated from 7.44% to 6.83%

There was a sudden change in the economic data on September 12. According to a survey of economists by CNBC-TV18, the consumer price index (CPI) result for August was 6.83 percent less than the projected 7.08 percent.

On the other hand, the industrial output for July outperformed forecasts, growing at a rate of 5.7% as opposed to the anticipated 5.2. The most recent Industrial Production Index (IIP) report shows the greatest level since November 2022, which is notable.

Goldman Sachs' Chief Economist for India, Santanu Sengupta, spoke with CNBC-TV18 on the effects of these changes on the economy, including the potential for revised growth projections and diminished fears about inflation.

According to him, the first estimate for this month was 6.9 percent; however, the actual result turned out to be significantly lower, at 6.8 percent. The quarterly prediction of 6.7 percent for the current quarter is still supported by Goldman Sachs.

However, the company recognises that this expectation could have a modest negative if the initial September inflation estimate is taken into account. The fact that this projection is based on information from the first 10 days of September need to be emphasised.

Decrease in Food Inflation

Nearly half of the consumer price basket, or 9.94 percent, is attributed to food inflation last month, down from 11.51 percent the month before.

Rural inflation in August was 7.02 percent, just edging out urban inflation of 6.59 percent.

The results are better than predicted, but the inflation rate is still higher than the RBI's upper limit, L&T Financial Services Chief Economist Rupa Rege Nitsure stated in an interview with CNBC-TV18 on September 12.

Shortage of rain is the cause of concern

Given the unequal rains, the central bank will continue to be cautious. Crops in Rabi as well as Kharif may be harmed.

Despite the relatively short-lived surge in tomato prices being reversed, the outlook for food inflation is still uncertain due to other vegetables, such as onions, and kharif crops having a year-on-year (YoY) lag in sowing, such as pulses. Even while reservoir levels do not bode well for an early start to rabi planting, evenly distributed rains throughout the rest of September may assist to protect kharif yields, according to Aditi Nayar of ICRA.

Nikhil Gupta, an economist at Motilal, stated that he anticipated higher industrial output numbers.

In light of the weather-related disruptions, Goldman Sachs anticipates a growth of about 5% for the current quarter. They do, however, predict a recovery to roughly 7% in the following quarter. These forecasts take the effects of the disturbances into account, producing an estimate for slower growth. Their initial prediction was 7.8 percent, but they anticipate a drop to around 5 percent followed by a rise to roughly 7 percent. The growth for the second half of the year is anticipated to be about 6% on average.

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