Goldman Sachs Revises India’s Economic Forecast for FY21 from -14.3% to -10.3%; expects GDP to rebound in FY22


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After sharply reducing India’s economic growth forecast to a contraction of 14.3% just two months ago, US brokerage firm Goldman Sachs revised its estimates upward to -10.3% on Tuesday in 2020-21 following the announcement of effective vaccines that could allow containment and mobility policies. .

He also predicted that India’s GDP would rebound to 13% growth in the next fiscal year (2021-22).

This is the second such improvement in India’s growth estimates after Moody’s revised its GDP forecast upward last week.

“We predict that the large-scale availability of an effective vaccine in India could allow containment policies and mobility to normalize by mid-2022,” said Jonathan Sequeira and Andrew Tilton, economists at Goldman Sachs .

“This should allow a significant rebound in activity in 2021, particularly in the consumer services sectors, where activity remains well below pre-Covid levels.” The pace of the rebound, however, will be held back by some economic scars and factors such as a weak labor market, the impact on private sector income and balance sheets, tighter credit supply conditions and a boost. limited fiscal policy, warned the global finance company. .

On the price situation, he said, “inflation as measured by the consumer price index is estimated at 6.2% in 2020-21, and is expected to decline to 4.6% in price in FY22 as food prices fall due to easing supply restrictions, a mild monsoon, and favorable base effect. Core inflation may also moderate given low utilization rupee manufacturing capabilities and appreciation ”.

“As such, easing inflationary pressures should allow the Reserve Bank of India to lower rates. “We expect the RBI to cut its policy rates by an additional 35 basis points early next year,” the company said, implying a further rate cut this year is ruled out.

Earlier this week, Moody’s revised its growth estimate upwards to 8.6%, shrinking the Indian economy from 9.6% previously.

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