Goldman Sachs said that the Indian economy will go through a challenging time in 2009.
“We expect GDP growth to slow to 5.8% in FY10 due to falling external demand and slowing investment. We also expect WPI inflation to average 1% in FY10, down sharply from an estimated 9% in FY09. Our strategists remain underweight on the Indian stock market. In this bearish environment, we identify four macro themes which we think will generate investment opportunities and provide some downside protection in 2009,” said the economic research report of Goldman Sachs while focusing four principal elements that will revive Indian economy.
The report identifies 800 million Indian consumers-far removed from the credit crunch, unleveraged, benefiting from a decent agricultural crop and substantial government assistance by way of an agricultural loan waiver, employment guarantees, and large investments in rural infrastructure-will be a key driver of growth in 2009.
Secondly, the report says that government will take a centre-stage in 2009, with its spending growth far exceeding that of other sectors in the economy.
Expenditures will be up because of India-Pakistan tensions and the upcoming general elections. Public-sector companies, which are cash-rich and have low debts stand to benefit most.
Thirdly, with inflation and input prices coming down, those industries that have high variable costs compared to fixed costs and are in non-cyclical sectors stand to benefit the most in 2009.
Fourthly, with a supply shortfall, continued demand growth due to favourable demographics and urbanisation and falling construction costs along with massive fiscal and monetary incentives suggest that low-cost housing is highly favourable.