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Goldman Sachs expects India's economy to rebound by 2021

Goldman Sachs expects India's real GDP growth to contract 14.8 per cent in FY21 before bouncing back strongly to 27.1 per cent on YoY basis in Q2 2021 (April-June 2021) due to favorable base effects

twitter-logoBusinessToday.In | September 8, 2020 | Updated 20:18 IST
Goldman Sachs expects India's economy to rebound by 2021
Goldman Sachs has pegged India's real GDP at 27.1% YoY in Q2 2021 due to favorable base effects

Global rating agency Goldman Sachs has cut its estimates for growth in India's gross domestic product (GDP) for the current fiscal 2020-21 (FY21), but it expects the economy of the country to see a full-bound recovery by 2021. The research firm expects real GDP growth to contract 14.8 per cent in FY21 against its earlier estimate of 11.8 per cent contraction in this period. The agency, however, expects real GDP to bounce back strongly to 27.1 per cent on year-on-year basis in Q2 2021 (April-June 2021) due to favorable base effects. This is based on assumption that 70 per cent of the lost output in June 2020 will recover by June end of 2021.

"While the economy must now climb out of a deeper trough in 2020, we have upgraded our expectations of a rebound next year" say analyst at Goldman Sachs India.

India's gross domestic product (GDP) contracted by a sharp 23.9 per cent in April-June period of the current fiscal. Some agencies have predicted negative growth even during the July-September quarter of the current fiscal (April 2020 to March 2021).

Goldman Sachs has pegged average annual GDP growth in calendar year 2021 (CY21) and fiscal year 20212-22 (FY22) at 9.9 per cent and 15.7 per cent, respectively, against previous estimate of 3.8 per cent and 7 per cent. "Our forecasts assume that in level terms, real output in March 2022 would still be around 2 per cent below its level in March 2020," it said.

Japanese research firm Nomura, Fitch Ratings and India Ratings also see hopes of recovery in FY22. India Ratings and Research, which pegged GDP to contract 11.8 per cent in FY21, has estimated a rebound of 9.9 per cent in FY22.

Fitch Ratings expects India's economy to contract 10.5 per cent in the current fiscal before bouncing back in the next financial year. The economy, it said, will recover to 11 per cent in 2021-22 largely owing to base effect and grow by 6 per cent in the following year.

The unlock process has started in India from June 1 with the graded relaxation of lockdown restrictions despite the rise in the number of coronavirus cases. However, the continued spread of the virus - India now has the second highest number of coronavirus case in the world - and the imposition of sporadic shutdowns across the country continue to depress sentiment and disrupt economic activity.

By Chitranjan Kumar

Also Read: Infographic: India's GDP - Apples to apples

Also Read: Global GDP to shrink 4.4%, China to register 2.7% growth in 2020: Fitch

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