Advertisement
Tuesday, Aug 09, 2022
Outlook.com
Outlook.com

India's GDP May Plummet To Multi-decade Low Of 1.6%: Goldman Sachs

Indian policymakers have not been aggressive enough in their response till now to the crisis, and will need to eventually intensify their efforts, economists at Goldman Sachs said.

India's GDP May Plummet To Multi-decade Low Of 1.6%: Goldman Sachs
Image for representation. | File photo
India's GDP May Plummet To Multi-decade Low Of 1.6%: Goldman Sachs
outlookindia.com
2020-04-08T17:07:04+05:30

Economic growth is likely to plummet to a multi-decade low of 1.6 per cent in fiscal year 2020-21 due to COVID-19 pandemic and ensuing measures like lockdowns and social distancing, an American brokerage said on Wednesday in one of the bleakest forecasts on GDP yet.

Indian policymakers have not been aggressive enough in their response till now to the crisis, and will need to eventually intensify their efforts, economists at Goldman Sachs said.

It can be noted that growth was estimated to slide to a decadal low of 5 per cent for FY20 even without the pandemic, and the virus outbreak has only worsened the woes.

Many analysts have been doing downward reviews of their forecasts amid coronavirus concerns with some estimating a contraction in the first quarter of the fiscal, but this is the lowest forecast for the year as a whole yet.

"Despite the policy support so far, and our expectations of more, we believe that the nationwide shutdown, and rising public anxiety about the virus are likely to lead to a sharp deterioration in economic activity in March, and in the next quarter," it said.

The brokerage, which had forecasted the GDP to expand by 3.3 per cent on a real basis in FY21 on March 22, said the 1.6 per cent growth will be deeper than the commonly perceived recessions India has experienced in 1970s, 1980s and 2009.

The growth slowdown is different from previous recession episodes because there is fear in the minds of citizens which were not present earlier, it said.

"Our sense so far is of a less aggressive policy stimulus by Indian policymakers compared to, for example, 2009," it said, adding it hopes more actions will follow both from the RBI and the government on top of the 0.75 per cent rate cut and the stimulus package of Rs 1.75 lakh crore that they have initiated, respectively.

"The fiscal math will be dented by only 0.08 per cent, if we were to include the Rs 1.75 lakh crore package," it said, adding that states will also jump in with their fiscal packages.

Consumption, which contributes 60 per cent of the GDP, is set to be hit badly because of the lockdown, the brokerage said, upwardly reviewing the impacts on services consumption.

It now expects 95 per cent hit to recreation and culture, and hotels and restaurants sectors (up from 70-80 per cent earlier) and education down by 80 per cent (up from 60 per cent).

"These effects obviously appear very high; in our growth forecasts, we assume these effects to be partial, given that the enforcement of even the nationwide lockdown is not complete, and we assume a staggering exit from the lockdown," it noted.

Apart from that, high frequency data is also not showing much hope, as auto sales were down sharply in March, besides, the fall in manufacturing purchasing managers index and muted global demands. 

Advertisement

Outlook Newsletters

Advertisement
Advertisement
Advertisement

Read More from Outlook

Lament Of Separation: Songs Of Habba Khatun, Last Queen Of Kashmir, Still Echo In Valley

Lament Of Separation: Songs Of Habba Khatun, Last Queen Of Kashmir, Still Echo In Valley

In happy times and sad, Habba Khatun’s sensuous songs make both young and old emotional. With the never-ending conflict bringing tragedies to every doorstep, Habba’s lyrics of separation amplify their mourning.

How Indian Laws Govern People’s Right To Love And Live

How Indian Laws Govern People’s Right To Love And Live

In India, only those relationships between a man and a woman are considered to be legitimate when there is a marriage between the two.

Kohli Quits Test Captaincy, Leaves Leadership Vacuum

Kohli Quits Test Captaincy, Leaves Leadership Vacuum

Virat Kohli, 33, had recently stepped down as India's T20I captain and was subsequently removed as the ODI captain.

UP Elections 2022: How Congress Is Harnessing Power Of 'Persecuted' Women To Counter BJP

UP Elections 2022: How Congress Is Harnessing Power Of 'Persecuted' Women To Counter BJP

A Mahila Congress leader, who is the face of the ‘Ladki Hoon, Lad Sakti Hoon’ campaign, however, has accused the party of anti-women bias after she was denied a ticket.

Advertisement