The United States-based multinational investment bank Goldman Sachs has predicted that the Indian economy will grow just 1.6% in 2020-’21 due to the impact of Covid-19 pandemic, reported PTI. This would be the lowest pace of growth in several decades, and is the worst forecast made by research agencies for India amid the pandemic.
This is the second time that Goldman Sachs has slashed its forecast for India’s economic growth for 2020-’21, according to BloombergQuint. Its previous estimate for the same period was 5.8%.
“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,” the economists at Goldman Sachs said in a report titled “An Unprecedented Sudden Stop for India”.
The report said that Indian policymakers have not been aggressive enough in their response to the crisis so far, and will need to strengthen attempts to revive the economy.
The research agency said the 1.6% growth will be slower than the rate seen during earlier recessions in India in the 1970s, 1980s and 2009. However, the slowdown differs from those episodes due to the fear related to Covid-19 that was not present earlier, the report said.
The researchers expressed hope for more action from the Reserve Bank of India and the Indian administration on top of the 75-basis-point cut in interest rates and stimulus package of Rs 1.75 lakh crore. The report added that consumption, which adds to 60% of the GDP, is set to be badly hit due to the 21-day lockdown that began on March 25.
The research agency now expected a 95% impact to recreation and culture, and in hotels and restaurant sectors, up from 70%-80% earlier. It further added that the education sector will see a decline of 80%, instead of 60% as projected earlier. “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,” the report said.
Last week, the Asian Development Bank slashed its forecast for India for the financial year of 2020-’21, saying it is likely to slow down to 4% amid the global economic meltdown triggered by the coronavirus pandemic.
The global economic meltdown triggered by Covid-19 comes at a time when confidence in the Indian economy is giving way to uncertainty because of the continued slump in manufacturing. India’s economic growth slipped to a nearly seven-year low of 4.7% in the October-December, according to government data.
Last month, American credit rating agency Fitch Ratings’ company India Ratings and Research revised its growth forecast for India in the 2020-’21 financial year to 5.1%, saying a crisis is likely to envelop the economy as the coronavirus pandemic continues to hit investments and exports globally.