The Indian economy is the worst-hit among major economies, American brokerage Goldman Sachs said on Tuesday sharply cutting its 2020-21 GDP forecast to a contraction of 14.8 per cent. It had earlier estimated that the economy of the country, which is now home to the second-largest number of COVID-19 infections, to contract by 11.8 per cent.
The estimate comes days after official data said the economy contracted by 23.9 per cent for the June 2020 quarter, compared to the level it was at in the year-ago period as activity across all sectors barring agriculture contracted due to the lockdowns. The nearly two-month-long lockdowns chilled economy activity but was unable to contain the number of infections, which stands at 40 lakh. “India’s GDP (gross domestic product) hit from COVID-19, the highest across major economies,” the analysts at the brokerage said.
They now believe that the economy will contract 13.7 per cent for the September 2020 quarter and 9.8 per cent for the December 2020 quarter, as against the 10.7 per cent and 6.7 per cent contractions, respectively, estimated earlier. “Our estimates imply that real GDP falls by 11.1 per cent in 2020, and by 14.8 per cent in FY21,” they added.
The 14.8 per cent contraction in 2020-21 is among the most pessimistic one among all the analysts till now. Earlier in the day, analysts at India Ratings and Research revised down their estimate to an 11.8 per cent contraction for 2020-21, while economists at largest lender SBI are now expecting a 10.9 per cent contraction.
Like other analysts, the brokerage said there will be a sharp rebound in 2021-22 because of the low base and estimated the GDP to clock a 15.7 per cent growth in the next fiscal year. Assuming 70 per cent of the lost output in June 2020 is recovered in June 2021, they are expecting a real GDP growth of 27.1 per cent in the April-June 2021 quarter.
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