JOIN USGoldman sees recession in India as consumption takes severe hit
By Abhishek Vishnoi
India’s economy will likely contract in the first two quarters of the year as consumption plunges during a three-week lockdown to contain the coronavirus outbreak, according to Goldman Sachs Group Inc.
Gross domestic product is forecast to shrink an annualized 1.4% on a quarter-on-quarter basis in the first three months of the year and 3.8% in the second quarter, Goldman economists Prachi Mishra and Andrew Tilton wrote in a report. That will bring down growth in the fiscal year through March 2021 to 1.6% versus a previous estimate of 3.3%, they said.
The virus pandemic has brought “an unprecedented sudden stop” to activity in India, where consumption makes up 60% of the economy, the economists said.
Goldman expects a strong sequential recovery in the second half of the fiscal year based on a staggered removal of the ongoing nationwide lockdown and further monetary and fiscal support.
Prime Minister Narendra Modi’s government has so far provided virus-relief stimulus of just 0.8% of GDP, while the central bank has cut interest rates by 75 basis points and has injected cash worth 3.2% of GDP since February.
“The global Covid-19 crisis -- or more precisely, the response to that crisis -- represents a physical (as opposed to purely financial) constraint on economic activity that is unprecedented in postwar history,” the economists wrote.