AGENCIES, Mumbai: On Wednesday, economists at research agency Goldman Sachs released a document, one of its bleakest forecasts on India’s GDP yet.
Goldman Sachs expects the global economy to sink into recession in 2020 and sees the coronavirus (Covid-19) pandemic–hit global gross domestic product (GDP) come in at a negative 1.8 per cent in 2020. The latest forecast is a 5 percentage point (pp) downward revision since early this year and around 3 pp lower than the March 22 forecast.
For India, it has lowered its GDP forecast from 3.3 per cent earlier to 1.6 per cent in financial year 2020-21 (FY21). “We now expect sequential real GDP growth (quarter-on-quarter seasonally adjusted and annualised rate) of -1.4 per cent in Q12020 (revised down from 3.5 per cent), -3.8 per cent in Q2 2020 (revised down from -2.0 per cent), +2 per cent, 7.5 per cent in Q3 and Q4, respectively, and further strong gains of +11 per cent in Q1-2021. This takes our FY21 GDP forecast down to 1.6 per cent on an annual-average basis,” wrote Andrew Tilton, Goldman Sachs’ chief Asia-Pacific economist.
Goldman Sachs, like most other research houses, expects a strong economic recovery in the second half of 2021 based on three assumptions.
First, the three-week nationwide lockdown is expected to be removed only in a staggered fashion. As a result, social distancing measures will help reduce new infections over the next four – six weeks. While the fiscal easing so far has been limited, they do expect more fiscal measures by the central and the state governments.
“We expect the RBI to continue with its monetary easing policy, along with liquidity infusion measures. While more forceful policy support could present some upside risk, the recovery could further be delayed if the pandemic is not brought under control globally and domestically over the next few months,” Tilton said.
That said, 1.6 per cent growth for 2021 would be deeper compared to widely perceived ‘recessions’ India has experienced in the 1970s, 1980s, and in 2009.
“Notably, as our global team has argued, the global COVID-19 crisis — or more precisely, the response to that crisis — represents a physical (as opposed to purely financial) constraint on economic activity that is unprecedented in post-war history.”