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Goldman Sachs Chief India Economist Santanu Sengupta expects the Reserve Bank of India (RBI) to raise interest rates three more times by June 2027, adding a total of 75 basis points to the increase.
Despite global uncertainties, Sengupta expects India’s economy to grow by nearly 7%. He warned that the El Niño weather pattern could slow economic growth and push inflation higher in 2027.
Goldman Sachs expects the RBI to raise rates in December and February, followed by another increase in either April or June.
Sengupta said the central bank could pause after February to assess economic conditions before making its next decision. He warned that financial markets may be underestimating the risks posed by El Niño, which could create greater economic challenges in 2027 than in 2023.
While the weather pattern may have a limited impact on the kharif harvest, it could disrupt subsequent crop production.
Lower reservoir levels could affect the rabi harvest, while declining food stocks in 2027 could add to inflationary pressures.
Crude oil prices remain another major risk to India’s economic outlook.
Goldman Sachs has based its projections on oil prices ranging between $85 and $95 per barrel.
Prices remaining above $100 could weaken economic growth and intensify inflation.
Sengupta said India’s ability to sustain strong growth stood out despite its dependence on imported oil and challenges facing the global economy. He added that the government had limited scope to stimulate demand through further Goods and Services Tax (GST) cuts or income tax reductions.
The outlook highlights the risks that adverse weather conditions and elevated oil prices could pose to India’s economy in 2027, potentially slowing growth while pushing inflation higher.
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