‘Economy may shrink 45% in Jun quarter’

THE I-BANK HAD EARLIER ESTIMATED GROWTH TO CONTRACT 20% IN Q1 AND 0.4% IN FY21

nNEWDELHI:GOLDMAN Sachs on Sunday said India’s economy may contract by a huge 45% in the June quarter and the projected 5% fall in gross domestic product (GDP) for 2020-21 will be deeper compared to all “recessions” India has ever experienced.

Earlier, the investment bank had estimated India’s growth to shrink 20% in the three months to June and 0.4% in FY21. It has also revised its global growth forecast from -2.5% to -3.6% for 2020, with risks remaining on the downside.

“In India, the virus continues to spread, the nationwide lockdown continues till May 17 and the PM already announced it will be extended, with gradual relaxation of restrictions, while concerns among consumers and businesses continue. The deeper trough in our Q2 forecasts reflects the extremely poor economic data we have received so far for March and April, and the continued lockdown measures, which are among the most stringent across the world,” it added.

The report was released before lockdown was extended.

Goldman Sachs expects a strong sequential rebound of 20% in the September quarter. However,

beyond that, it expects only a gradual recovery of 14% and 6.5% in the December and March quarters, respectively, as “the targeted policy support continues to be tepid compared to other emerging economies, and far less than most advanced economies”.

After discussions with firms, Goldman Sachs’ equity analysts said restarting economic activity during the extended lockdown continues to pose challenges, especially in red zones, which comprise about 45% of GDP.