India Insulated From US-China Trade War: Goldman Sachs

Despite global economic shocks, India will be relatively insulated from global economic shocks that are being expected from a potential trade war between the United States and China in 2025, according to a Goldman Sachs report.

This is because despite ongoing global uncertainties India's long-term structural prospects remain robust.

"In 2025, we believe India will likely be a relatively insulated economy from global shocks emanating out of a potential trade war between US and China", said the report.

However, a cyclical growth slowdown is also anticipated with the country's GDP growth forecast on an imminent decline to 6.3% year-on-year in 2025, the report added.

This slowdown is due to constant fiscal consolidation and tighter credit growth because of macro-prudential measures taken by the Reserve Bank of India.

The report also speculates that the RBI's monetary policy will remain cautious in 2025 and the central bank will begin easing interest rates from the first quarter of 2025, with a cumulative reduction of 50 basis points by mid-year.

The RBI is likely to proceed carefully, amid global trade uncertainties and given the strong dollar trend.

Retail loan growth may have lower interest rates and may remain subdued due to macro-prudential tightening.

Though inflation may align with the RBI's target next year, the rate-cut cycle is expected to be limited. RBI, the report says, is likely to maintain a balanced approach, keeping monetary policy close to the national neutral rate, estimated at 6 per cent.

The report further suggests a 25-basis-points repo-rate cut in February 2025, followed by another 25-basis-point cut in April.

The central bank is also allowed to maintain a liquid surplus, which allows overnight inter-bank rates to fall 5.75%, effectively delivering 75-basis-points easing from the current level of 6.50%.

Despite challenges in the near future, the Indian economy is anticipated to maintain amidst global uncertainties, showcasing resilience in the face of challenges.