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Last Updated : May 18, 2020 08:40 AM IST | Source: Moneycontrol.com

Goldman Sachs forecasts worst recession for India, sees GDP fall by 5% in FY21

According to Goldman Sachs, the aggregate discretionary component of fiscal support announced by finance ministry, including Rs 1.7 lakh crore package announced in March, stands at 1.3 percent of GDP (Rs 2.7 lakh crore), “much smaller than the aggregate figure of 10 percent of GDP (Rs20 lakh crore) announced by the Prime Minister

Goldman Sachs company logo
Goldman Sachs company logo

The economic package announced by the Narendra Modi government over the past few days to help economic recovery is unlikely to have an immediate impact on growth, said Goldman Sachs in a report released on Sunday, saying that it now estimates real GDP to fall by 5 percent in fiscal year 2021.

“There have been a series of structural reform announcements across several sectors over the past few days. These reforms are more medium-term in nature, and we therefore do not expect these to have an immediate impact on reviving growth. We will continue to monitor their implementation to gauge their effect on the medium-term outlook for the Indian economy,” said Goldman Sachs in a report.

It added that the -5 percent growth we forecast for FY21 would be deeper compared to all “recessions” India has ever experienced, Goldman Sachs said. On May 12, Prime Minister, Narendra Modi announced that Government will unveil Rs 20 lakh crore economic stimulus to help the economy fight the COVID-19 slowdown.

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But, going by the details announced by union finance minister Nirmala Sitharaman in the past five days, it shows that the actual stimulus amount was much less.

According to Goldman Sachs, the aggregate discretionary component of fiscal support announced by finance ministry, including  Rs 1.7 lakh crore package announced March, stands at 1.3 percent of GDP ($2.7 lakh crore), “much smaller than the aggregate figure of 10 percent of GDP (Rs 20 lakh crore) announced by the Prime Minister.”

The weaker economic outlook reflects the extremely poor economic data we have received so far for March and April, and the continued lockdown measures, which are among the most stringent across the world, Goldman Sachs said.

It further said: “We expect a strong sequential mechanical rebound in Q3. However, beyond Q3, we expect only a gradual recovery, as the targeted policy support continues to be tepid compared to other emerging economies, and far less than most advanced economies,” the report said.

India has been under a lockdown since March 25 with most of the economic activities except essential services came to a halt leading to economic distress and job losses. The government has now extended the lockdown to May 31.
First Published on May 17, 2020 08:34 pm
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