Goldman Sachs predicts India will dominate emerging markets in 2025

In a recent report, Goldman Sachs highlighted the promising outlook for India, foreseeing that the country will rank among the top emerging markets by 2025. This positive forecast stems from various factors contributing to India's macroeconomic stability. The report indicates robust domestic growth driven by favorable demographics, sound governance, and structural increases in consumer spending. Given these conditions, Goldman Sachs estimates that India's GDP will continue to grow at an average rate of 6.5 percent from 2025 to 2030. Furthermore, with inflation expected to remain moderate, these economic indicators suggest a favorable investment climate for domestic and international investors alike. The report elaborates on India's earnings growth projections, estimating an annual increase of 18-20 percent over the next four to five years. Key drivers of this growth include a nascent cycle of private capital expenditure, corporate balance sheet recovery, and a shift toward increased discretionary consumption. This has led to a diminished correlation between Indian equities and global markets, positioning India as a more insulated option against international economic fluctuations. Notably, equity earnings in the Sensex are projected to compound at a rate of 17.3 percent annually through FY27, indicating a significant outperformance when compared to consensus estimates. As outlined by Santanu Sengupta, the chief India economist at Goldman Sachs, the structural long-term growth narrative for India appears resilient and intact. The report underscores the importance of fiscal consolidation and the ramp-up in private investment as pivotal contributors to maintaining macroeconomic stability. Even in the face of potential global challenges, such as geopolitical tensions or policy changes in major economies like the US and China, India's economic framework appears poised to thrive. In particular, India's projected inflation for 2025 stands at an average of 4.2 percent year-on-year, significantly benefitting from favorable agricultural conditions, particularly in the food sector. While challenges such as food supply shocks resulting from adverse weather conditions pose risks, Goldman Sachs remains optimistic about India's overall economic trajectory. The investment bank's emphasis on favoring cyclical sectors over defensive ones, along with strategic recommendations for SMID caps over larger companies, reveals a clear preference for growth-oriented investment strategies. This focus, combined with stable inflation projections and expected healthy GDP growth, offers a robust framework for Indian market resilience moving forward.