Goldman Sachs sees 7.8% GDP growth for India

Amid projections that Indian economy is likely to grow close to 9% in 2008-09, world's biggest securities firm Goldman Sachs has lowered the GDP growth forecast to 7.8% from 8% for the year.

The report, however, says the Indian economy remains largely on course on account of its structural strength.

Adding to fears that exports growth will slow down due to appreciation of the rupee and a global slump, the report said shipments would nearly halve, with software, textiles and apparels, gems and jewellery sectors being the worst hit.

"We are revising down our GDP growth forecast to 7.8% from 8% for FY09 due to a larger slowdown in external demand. We estimate that export growth will halve in FY09 to 9.8% from 8.6% due to the global slowdown as well as rupee appreciation," Goldman Sachs said.

Government hopes to maintain GDP growth close to 9%, although the Reserve Bank's tight monetary stance has lowered consumer demand and slowed down the industrial sector.

The report said revenue growth in IT sector would also go down to 22% from 39%. It added that most of the revenues of IT companies are concentrated in the US and a recession there would reduce IT spending by American firms.

It also expects RBI to ease monetary policy in FY 2009 and FY 2010 as growth moderates. RBI is likely to cut rates in April and by another 25 basis points in FY 2009. "We are also putting in a further easing of 50 basis points in FY 2010."