India to grow at 7.8% in FY11: Goldman Sachs

India to grow at 7.8% in FY11: Goldman Sachs

Mumbai: India’s economy will likely grow at 7.8% in fiscal year 2010-11, higher than a previous forecast of 6.6% due to an improved investment outlook, better external environment and a recovery in consumption demand, Goldman Sachs said in a note on Monday.

But it kept its growth estimate for the current year ending March 2010 at 5.8% citing a poor monsoon and the follow-on negative impact on rural demand in the near-term.

Goldman’s fiscal year target for wholesale price index-based inflation as of end-FY10 is 6.5% with an upside risk, and expects the Reserve Bank of India (RBI) to tighten policy rates by 300 basis points in calendar year 2010.

“With growth and inflation expected to be higher, the ‘exit´ policy from an extremely loose policy would entail in our view, tightening through the currency, rate hikes, liquidity absorption, and a gradual removal of the fiscal stimulus, in that order," Goldman Sachs said.