India's GDP may plummet to multi-decade low of 1.6% in FY21 amid coronavirus pandemic, says Goldman Sachs

In the bleakest of all forecasts for India so far, Goldman Sachs on Wednesday cut the country’s economic growth estimates to 1.6% in 2020-21 due to Covid-19 and said policymakers in India have not been aggressive enough in their response to deal with the virus till now.

This is the lowest economic growth forecast in several decades. It said that while the fiscal easing so far has been limited to handling the situation arising out of the virus spread, it does expect more measures by central and state governments.

The sectors, which could be severely hit according to it, were recreation and culture, restaurants and hotels.

“We expect RBI to continue with its monetary easing policy along with the liquidity infusion measures. While more forceful policy support could present some upside risk, the recovery could further be delayed if the pandemic is not brought under control globally and domestically over the next few months,” Goldman Sachs’ chief Asia-Pacific economist Andrew Tilton said in a co-authored report with Prachi Mishra.

The American brokerage expected the nationwide shutdown, and rising public anxiety about the virus, could lead to sharp deterioration in economic activity from March to June in 2021.

The brokerage said the 1.6% growth will be deeper than the commonly perceived recessions India has experienced in 1970s, 1980s and 2009.

“Our sense so far is of a less aggressive policy stimulus by Indian policymakers compared to, for example, 2009,” it said and hoped more actions will follow both from the RBI and the government on top of the 0.75% rate cut and the stimulus package of Rs 1.75 lakh crore.