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Goldman Sachs reiterates its India 2021 GDP growth forecast at 10%

In September, the bank had forecast India's 2021 calendar year growth at 9.9 percent and financial year 2021-22 at 15.7 percent. GS expects these projects to hold, making India the fastest growing major economy in the world.

November 11, 2020 / 03:20 PM IST
(Image: Reuters)

(Image: Reuters)

Investment bank Goldman Sachs has reiterated its projections for India's gross domestic product (GDP) growth in calendar year 2021 to be 10 percent, the highest among the world's major economies.

In a global economic analysis report titled 'V(accine)-Shaped Recovery' Goldman Sachs also forecast India's calendar year 2022 GDP growth at 7.3 percent, again the highest among the world's 11 biggest economies.

In September, the lender had forecast India's 2021 calendar year growth at 9.9 percent and financial year 2021-22 at 15.7 percent.

The report is dated September 7, before the news of the Pfizer and BioNTech COVID-19 vaccine emerged as the most promising of all the vaccines in the works.

Read | India in talks with Pfizer, COVID vaccine manufacturers for supply: Health Ministry

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How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

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"Our growth forecasts in the emerging world in 2021-22 are mostly above consensus. The main exception is China, where output is already back to pre-pandemic levels, credit is growing rapidly, and fiscal policy remains very expansionary. Policymakers look set to react by easing off the accelerator, which should result in a modest sequential growth slowdown," the report by GS said.

The report said that the second wave of coronavirus infections that is now sweeping the United States and Europe, where governments have already reacted with renewed partial lockdowns, has created downside risks to global growth prospects.

"This has led us to downgrade our October-December and January-March GDP estimates on both sides of the Atlantic; in fact, we now expect the European economy to contract significantly in Q4," it said.

The bank noted that just as the global economy rebounded quickly from the lockdowns earlier this year, the expectation was that the current weakness to give way to much stronger growth when the European lockdowns end and a vaccine becomes available.

"Assuming the FDA approves at least one vaccine by January and mass immunization of the general population starts shortly thereafter, as we expect, growth should pick up sharply in April-June. The apparent lack of scarring effects from the earlier GDP plunge is consistent with this view," it said.
Arup Roychoudhury
first published: Nov 11, 2020 03:20 pm

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