Goldman Sachs lowers India’s growth forecast


New York : Even as policymakers in India say the country could now look forward to a growth above nine percent, Goldman Sachs has lowered its forecast for the country to 7.8 percent on account of US slowdown and falling exports.

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Yet, the financial consultancy and merchant-banking firm said in a report Monday that the success story of the Indian economy remained “largely on course due to structural strength”.

“There could be a tipping point at which the US slowdown has a more significant impact on Asia than before,” said the investment bank’s chief economist Michael Buchanan.

“The further deterioration in the US economy comes as Japan is also teetering on the edge of recession,” he said, as Goldman Sachs also trimmed China’s growth by 30 basis points to 10 percent.

The 2008 forecast for Japan is down to 8.3 percent from 8.6 percent, for Hong Kong to 5.2 percent from 5.5 percent, for Singapore to 6.4 percent from 7.3 percent and South Korea to 5 percent from 5.1 percent.

According to Goldman Sachs, the Indian economy will be hit by a halving of its export growth in the coming fiscal (2008-09) as well as anticipated appreciation of its currency. The Indian rupee appreciated more than 12 percent in 52 weeks.

This appreciation, the investment banking company says, is already damaging the export competitiveness of India’s outsourcing companies and some other sectors that have been relying on a low-cost base to attract customers.

Prime Minister Manmohan Singh had said recently that despite the turmoil in the global economy, India could not only sustain its high growth but also push it to 10 percent with right policies and dedication.

“It is possible that with correct set of policies and dedicated effort by both the central and state governments, we will not only maintain this momentum of high growth but may be able to raise it to 10 percent,” he had remarked.