Goldman Sachs Boosts India’s Economic Forecast on Vaccine Progress, Now Expects 10.8% Contraction in FY21, Auto News, ET Auto


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GDP will experience an impressive recovery in FY22, with 13% growth based on weak base and vaccine benefits, Goldman Sachs said in a report.

MUMBAI: Foreign brokerage firm Goldman Sachs on Tuesday raised its forecast for India’s GDP to contract 10.3 percent in FY21, from an earlier estimate of negative growth of 14.8 percent.

The US-based company said developments on the vaccine front – where two candidates have made good progress – will be very helpful for the recovery.

Reserve Bank expects India’s GDP to contract 9.5% in real terms in current fiscal year due to impact on economy during Covid pandemic -19.

GDP will experience an impressive recovery in FY22, growing 13% on the weak basis and the benefits of the vaccine, Goldman Sachs said in a report.

“There is still a high degree of uncertainty around the outlook – and growth could significantly exceed or underestimate these forecasts – depending on how the virus evolves and vaccine-related developments over the coming year.” , did he declare.

He does not expect a normalization of containment policies and mobility restrictions until mid-2022, once a vaccine is deployed.

A significant rebound in economic activity will occur from 2021 itself, he said, adding that consumer service sectors will experience a faster recovery.

However, the pace of the recovery will be held back by certain “economic scars” and a number of factors such as a weak labor market, the impact on private sector income and balance sheets, tighter supply conditions. credit and limited fiscal policy impetus, it said.

Headline inflation is expected to decline to the midpoint of the RBI’s 2-6% target range by mid-2021, as food prices fall due to the easing of supply restrictions, d ‘a mild monsoon and favorable base effects, he said.

Core inflation could also moderate given weak manufacturing capacity utilization and the appreciation of the rupee.

This will result in a 0.35% rate cut from the RBI’s Monetary Policy Committee (MPC) next year, he said, adding that the panel of three new members had a conciliatory slant.

The brokerage further said it would be overweight Indian equities due to the macroeconomic recovery and relatively higher sensitivity of Indian equities to positive vaccine results and added that appreciation pressures from the rupee will persist.

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