Goldman Sachs Predicts India as a Leading Emerging Market by 2025
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New Delhi, Jan 6 (NationPress) Goldman Sachs anticipates India will rank among the top-performing emerging markets by 2025, attributed to the nation's solid macroeconomic stability fostered by enhanced terms of trade, precise inflation targeting, and dependable domestic risk capital.
The prominent global investment bank envisions an annual earnings growth of 18-20% over the next 4-5 years, propelled by a burgeoning private capex cycle, corporate balance sheet re-leveraging, and a structural uptick in discretionary consumption.
These elements have lowered India’s beta to emerging markets to around 0.4, validating its premium valuation multiples, as noted in the report.
Goldman's earnings forecasts outpace consensus, emphasizing a diminishing correlation between Indian equities and global markets. Nevertheless, external factors, including policy shifts in the US and China, along with geopolitical shifts, will likely continue to affect Indian markets, the report elaborated.
Goldman anticipates that macroeconomic stability will be further reinforced through fiscal consolidation, heightened private investment, and a favorable real growth-real rates gap. Their expectations include strong domestic growth, no recession in the US, stable oil prices, moderate rate cuts, and a supportive liquidity environment. The Sensex earnings are expected to grow at a compounded rate of 17.3% annually through FY27, which is 15% above consensus.
In terms of investment strategy, Goldman prefers cyclicals over defensives and SMID caps over large caps, advocating for overweight positions in Financials, Consumer Discretionary, Industrials, and Technology.
According to a report from Goldman Sachs Research published last month, the firm believes the Indian economy will be relatively shielded from global disturbances in the upcoming year — including tariffs imposed by the newly elected US President. While India’s GDP is projected to continue its robust growth trajectory in the long term, a temporary slowdown is expected next year due to reduced government spending and credit growth, as per the forecast.
“The long-term growth narrative for India remains solid, driven by favorable demographics and stable governance,” stated Santanu Sengupta, chief India economist at Goldman Sachs Research, in his team’s report.
Economists predict that India’s economy will expand at an average rate of 6.5% between 2025 and 2030, according to the report.
Goldman Sachs forecasts that headline inflation in India will average 4.2% percent year-on-year in the 2025 calendar year, with food inflation at 4.6% percent — significantly lower than the analysts’ prediction of over 7% for 2024, credited to favorable rainfall and successful sowing of summer crops.
“Potential food supply disruptions due to weather-related issues pose a significant risk to this forecast. So far, high and unpredictable food inflation, primarily driven by vegetable prices due to weather disturbances, has prevented the RBI from easing its monetary policy,” the report concluded.
