Indian economy worst hit, FY21 GDP to contract 14.8 pc: Goldman Sachs

The Indian economy is the worst hit among major economies, American brokerage Goldman Sachs said on Tuesday, sharply cutting its 2020-21 GDP forecast to a contraction of 14.8 percent.

It had earlier estimated that the economy of the country, which is now home to the second largest number of COVID-19 infections, would contract by 11.8 percent.

The estimate comes days after official data said the economy contracted by 23.9 percent for the June 2020 quarter, compared to the level it was at in the year-ago period as activity across all sectors barring agriculture contracted due to the lockdowns. The nearly two-month-long lockdowns froze economic activity but was unable to contain the number of infections, which stand at 40 lakh.

"India's GDP (gross domestic product) was hit by COVID-19, the highest across major economies," analysts at the brokerage said.

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They now believe that the economy will contract 13.7 percent for the September 2020 quarter and 9.8 percent for the December 2020 quarter, as against the 10.7 percent and 6.7 percent contractions, respectively, estimated earlier.

"Our estimates imply that real GDP falls by 11.1 percent in 2020, and by 14.8 percent in FY21," they added.

The 14.8 percent contraction in 2020-21 is among the most pessimistic among all analysts till now.

Earlier, analysts at India Ratings and Research revised down their estimate to an 11.8 percent contraction for 2020-21, while economists at largest lender SBI are now expecting a 10.9 percent contraction.

Like other analysts, the brokerage said there would be a sharp rebound in 2021-22 because of the low base and estimated the GDP to clock a 15.7 percent growth in the next fiscal year.

Assuming 70 percent of the lost output in June 2020 is recovered in June 2021, analysts are expecting a real GDP growth of 27.1 percent in the April-June 2021 quarter.