One of the largest Investment banking service, Goldman Sachs has suggested a deeper interest rate cuts by the Reserve Bank of India to revive the pace of growth.
Central Statistics Office on Friday had announced that the Gross Domestic Product (GDP) growth for the first quarter of the financial year 2019-20 dropped to five per cent, the slowest pace in the last seven years.
The Wall Street firm, Goldman Sachs expects the Reserve Bank of India to reduce interest rates by 50 basis points in the next quarter, compared with its earlier estimate of 25 basis points. Elsewhere, Barclays Plc forecast an additional 65-basis-point decrease by the end of this year and Kotak Mahindra Bank estimated a 75-point reduction will come from the RBI.
"We now think a 50bps rate cut is likely in fourth quarter, with risks skewed toward deeper cuts," Prachi Mishra, chief India economist at Goldman Sachs in Mumbai, wrote in a note. The gross domestic product surprised strongly to the downside, leading to an adjustment in growth forecasts, she wrote.
Goldman slashed its growth forecast to 6 per cent for the current fiscal year to March from 6.9 per cent earlier. Barclays cut its prediction to 6 per cent from 6.3 per cent before Friday's release that showed growth in the $2.7 trillion economy slowed for a fifth straight quarter to 5 per cent in the three months ended June, the slowest pace since March 2013.