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Coronavirus crisis: India's GDP may contract 5.2% in FY21, says Nomura

The global brokerage also pegged the fiscal deficit at 5.5 to 6 per cent of GDP

twitter-logo BusinessToday.In   New Delhi     Last Updated: May 11, 2020  | 17:39 IST
Coronavirus crisis: India's GDP may contract 5.2% in FY21, says Nomura
Analysts at other global brokerage Goldman Sachs also expected the economy to contract steeply in FY21

Nomura has cut India's FY21 GDP growth forecast to -5.2 per cent against -0.4 per cent earlier. The global brokerage also pegged the fiscal deficit at 5.5 to 6 per cent of GDP after the government decided to borrow Rs 12 lakh crore compared to Rs 7.8 lakh crore estimated earlier.

"We expect real GDP growth to fall to -0.5 per cent y-o-y in 2020 (vs 5.3 per cent in 2019) and by -0.4 per cent in FY21 (vs. 4.6 per cent expected in FY20)," analysts at Nomura said in a note. The Japanese brokerage added that it expected a risk of additional borrowing, which is expected to be announced in the second half of the year.

The government recently announced that it will borrow Rs 4.2 lakh crore from the market. The total gross borrowing target has now increased from Rs 7.8 lakh crore budgeted for FY21 to a staggering Rs 12 lakh crore. The government needs additional money to meet coronavirus-related expenditure. It particularly needs the money to provide support to states gasping for funds.

Analysts at other global brokerage Goldman Sachs also expected the economy to contract steeply in FY21. "We expect GDP growth of -20 per cent in Q2; while we have upgraded our expectations of recovery after mid-year, with a 10 per cent and 14 per cent q-o-q annualised GDP gain in Q3 and Q4, respectively," it said in a note.

Moody's recently warned of the country's high fiscal deficit and high government debt as among the negative factors pushing credit risks higher. In late March, the RBI advanced its policy review meeting by a week and slashed rates by 0.75 per cent to support the economy.

Also read: Coronavirus India Live Updates: 75% COVID-19 cases in Delhi asymptomatic or with mild symptoms, says Kejriwal

Also read: Economic stimulus package this week; relief for MSMEs & workers; reforms on cards

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