Weak Investment, Slow GST Collections Big Challenges For Indian Economy, Says Goldman Sachs
Residential and commercial buildings in the Worli area of Mumbai. Three-fourths of India’s GDP growth in the last decade is attributable to consumption and only one-fourth to investment. (Photographer: Dhiraj Singh/Bloomberg)

Weak Investment, Slow GST Collections Big Challenges For Indian Economy, Says Goldman Sachs

Bookmark

Notwithstanding progress on GDP growth and inflation, a weak investment scenario and lower-than-expected GST collections are big challenges for the Indian economy, U.S.-based Goldman Sachs Group Inc. said on Friday.

India's gross domestic product grew at an average rate of 6.7 percent in 2010-2014 and 7.3 percent in 2015-2019, while average inflation rate fell from 10 percent to 5 percent during the same period.

"Despite growth being strong, overall, the investment climate was pretty weak," said Goldman Sachs' India Chief Economist Prachi Mishra in a podcast wherein she discussed drivers of the Indian economy.

Goldman Sachs, alongwith with a large group of investors, did a macro tour of Mumbai and Delhi earlier in 2019 to analyse investor concerns. Some of the concerns which were raised during the tour were muted monetary policy transmission and slow GST collections, said Mishra.

"I should add that weak investment, muted monetary transmission and slow GST collections still continue to be big challenges for the Indian economy at this point.”

According to Mishra, the average GDP growth in India over this decade has been about 7 percent. Three-fourths of that is actually attributable to consumption and only one-fourth to investment.

Goldman Sachs clients are concerned about whether the government has an appetite for radical structural reforms, particularly in the area such as land, labour, export promotion and privatisation, said Mishra.

"They're asking how likely is an accelerated reform scenario, which can really put India on a growth trajectory—higher growth trajectory close to double digits. And this is something we are watching on closely in terms of any big policy announcements going forward," the economist said.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.