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NEW DELHI: Global rating agency Fitch on Tuesday drastically revised its forecast for GDP growth, estimating it to contract 10.5% in 2020-21, while Goldman Sachs expects it to decline 14.8% in the current fiscal year.
Both entities have made sharp downward revisions to their forecasts after last month’s data showed the Indian economy contracting a record 23.9% in the June quarter, the steepest drop globally, hit 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 of our forecast for India’s GDP for the fiscal year ending March 2021 (FY21) to -10.5% from -5% in the previous outlook, ”Fitch said.
He said GDP fell 23.9% year-on-year in the second quarter of 2020 and estimates showed that the implicit decline in quarterly terms (for which no official data is available) was 25.6%, the biggest drop among all. the Fitch 20. countries (South Africa has not yet reported growth figures).
Fitch said India imposed one of the world’s tightest locks in the second quarter of 2020 and domestic demand fell dramatically.
“Limited fiscal support, the fragility of the financial system and the continuous increase in virus cases make it difficult to normalize activity quickly. The double-digit growth rate that 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 that, in light of the second-quarter GDP report, they were making more significant adjustments to their GDP forecasts for India. “We now forecast that the third quarter of 2020 and the fourth quarter of 2020 will have GDP growth of -13.7% year-on-year and -9.8% year-on-year, respectively (compared to -10.7% and -6.7 % previously). Our estimates imply that real GDP falls 11.1% in calendar 2020 and 14.8% in FY21 (compared to -9.6% and -11.8% growth in our previous projections) ” , the report reads.
But Goldman Sachs improved its expectations for a rebound next year. “In the second quarter of 21, we expect real GDP growth to pick up sharply year-over-year due to favorable base effects. Assuming that around 70% of lost production in June 2020 is recovered in June 2021, we expect real GDP in the second quarter of 2021 to be 27.1% year-on-year, ”said Goldman Sachs chief economist for India. , Prachi Mishra, and Andrew Tilton, chief Asia economist said in a note.
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