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NEW DELHI: Global ratings agency Fitch on Tuesday sharply revised its forecast for India’s GDP growth, estimating that it will contract 10.5% in 2020-21, while Goldman Sachs expects it to decline by 14.8% in the current fiscal year.
Both entities have made sharp downward revisions in their forecasts after data last month showed the Indian economy contracted a record 23.9% in the June quarter, the sharpest decline globally, battered by the impact of a strict lockdown.
“We have cut our 2020 GDP forecast for markets excluding China to -5.7% in this global economic outlook from -4.7% in June. This primarily reflects a huge downward revision to our India GDP forecast for the fiscal year ending March 2021 (FY21) to -10.5% from -5% in the previous outlook,” Fitch said.
It said that GDP fell by 23.9% year-on-year in Q2 ’20 and estimates showed that the implied decline in quarteron-quarter terms (for which official data are unavailable) was at 25.6%, the largest fall among all the Fitch 20 countries (South Africa is yet to report growth numbers).
Fitch said India imposed one of the most stringent lockdowns worldwide in the second quarter of 2020 and domestic demand fell massively.
“Limited fiscal support, fragilities in the financial system, and a continued rise in virus cases hamper a rapid normalisation in activity. The double-digit growth rate we expect for 2021-22 simply reflects the low base in 2020. We do not expect GDP to return to pre-virus levels until the first quarter of 2022-23,” Fitch said.
In a report, global investment bank Goldman Sachs said in light of the Q2 GDP report, they were making further significant adjustments to their GDP forecasts for India. “We now forecast Q3 ’20, and Q4 ’20 at GDP growth of -13.7% year-on-year and -9.8% yearon-year, respectively (compared to -10.7% and -6.7% previously). Our estimates imply that real GDP falls by 11.1% in calendar year 2020, and by 14.8% in FY21 (against a growth of -9.6%, and -11.8% in our previous forecasts),” the report said.
But Goldman Sachs upgraded its expectations of a rebound next year. “In Q2 ’21, we expect real GDP growth to bounce back sharply on a year-over-year basis due to favourable base effects. Assuming about 70% of the lost output in June 2020 is recovered in June 2021, we expect real GDP in Q2 2021 at 27.1% year-on-year,” Goldman Sachs chief India economist Prachi Mishra and Andrew Tilton, chief Asia economist, said in a note.

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