Goldman cuts India’s growth forecast

Wall Street brokerage Goldman Sachs has lowered its estimate for India’s economic growth to 11.1% in fiscal year to March 31, 2022, as a number of cities and states announced lockdowns of varying intensities to check spread of coronavirus infections.

India is suffering the world’s worst outbreak of Covid-19 cases, with deaths crossing 2.22 lakh and new cases above 3.5 lakh daily.

Several states and cities have imposed lockdowns of varying degrees. “The intensity of the lockdown remains lower than last year,” Goldman Sachs said in a report. “Still, the impact of tighter containment policy is clearly visible in higher frequency mobility data across key India cities.”

As containment policy has tightened, high frequency data—particularly on the services side—has taken a hit. The manufacturing side—as indicated by high frequency data on electricity consumption, and the stable April manufacturing PMI—has been more resilient.

Labour market indicators suggest that the daily unemployment rate has ticked up moderately in recent weeks, but the employment impact so far is much more contained than in April-June last year.

“Overall, most indicators still suggest that the impact has been less severe than it was in Q2 (April-June) last year,” Goldman Sachs said.

“While activity is likely to rebound back quite sharply from Q3 (July-September) onwards—assuming restrictions can ease somewhat over that timeframe—the net result is to lower our FY22 real GDP growth forecast to 11.1% (from 11.7% previously), and our 2021 calendar year growth forecast to 9.7% (from 10.5% ),” it said.