Goldman Sachs Cuts Its India GDP Forecast For FY21 To Lowest Yet
India’s GDP contracted 23.9% in April-June 2020.
After the lockdown to contain the coronavirus pandemic led to a steeper-than-expected contraction in India’s economy in the quarter ended June, economists further cut their growth estimates for the ongoing financial year.
Goldman Sachs expects India’s economy to contract 14.8% in the fiscal ending March 2021, the lowest forecast so far, compared with 11.8% predicted earlier, according to a statement. The economy is estimated to contract 13.7% and 9% in the second and third quarters, respectively. In the calendar year 2020, the economy may contract 11.1%, it said.
India’s GDP contracted 23.9% in the April-June 2020 period.
On a seasonally adjusted annualised basis, Goldman Sachs said GDP contracted 69% in the April-June 2020 period against a growth of 19% in the preceding three months.
But the financial services company expects a strong rebound in FY22 on account of favourable base effects. Assuming a step down to more normal levels of sequential growth, average annual GDP growth is now estimated at 15.7% in the fiscal ending March 2022, it said. “Our forecasts assume that in level terms, real output in March 2022 would still be about 2% below its level in March 2020.”
India Ratings
India Ratings & Research also revised its FY21 GDP growth forecast. It expects the economy to contract 11.8% against its previous estimate of 5.3% decline, according to a separate statement by the firm. The economic loss in FY21 is estimated at Rs 18.44 lakh crore, it said.
For FY22, GDP is estimated to rebound to 9.9%, it said.
While India Ratings estimates private final consumption expenditure to contract 12.8% in FY21, gross fixed capital formation is estimated to contract 27.3%. Consumption expenditure on essentials can recover in the second quarter of FY21. Discretionary spending for sectors such as airlines, hotels, airport, real estate and construction, however, is likely to recover only by the first quarter of FY22. Investment demand revival, the firm said, may be pushed beyond FY22.
Fitch Ratings
Fitch Ratings expects India’s economy to contract 10.5% in the ongoing fiscal compared with a fall of 5.0% forecast earlier. Consequently, the ratings agency now estimates 2020 GDP for emerging markets, excluding China, to contract 5.7% against a decline of 4.7% predicted earlier.
Limited fiscal support, fragilities in the financial system, and a continued rise in virus cases hamper a rapid normalisation in activity in India, Fitch said in its latest global economic outlook. “The double-digit growth rate we expect for FY22 simply reflects the low base in 2020,” it said, adding that the shortfall of activity relative to the pre-virus forecast is expected to be 16% by early 2022.