Goldman Sachs expects India’s GDP growth to fall to -3.6 percent in 2020 with further downside risks, revising its earlier forecast of -2.5 percent. The adjustment to the country’s FY21 GDP forecast is significant and going by the global brokerage’s prediction, India could see a ‘deep recession’ compared to all slowdown the economy has ever seen. For FY21, it expects real GDP to fall by 5 percent versus -0.4 percent in its previous forecast, Goldman Sachs noted in a recent report.

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However, the brokerage has upgraded its expectation of a rebound in Q3 and sees a 20 percent annualised QoQ gain versus earlier estimation of a 10 percent gain in Q3 GDP.

"We expect a strong sequential mechanical rebound in Q3. However, beyond Q3, we expect only a gradual recovery, as the targeted policy support continues to be tepid compared to other emerging economies, and far less than most advanced economies," the report said.

On a QoQ basis, it expects India's GDP growth contraction of 45 percent on a QoQ basis as compared to its earlier forecast of a 20 percent contraction.

For Q4 and Q1 of next year, the brokerage kept its projections unchanged at 14 percent and 6.5 percent, respectively.

In India, the virus continues to spread, the nationwide lockdown has been extended to May 31 to contain the virus, with the gradual relaxation of restrictions. However, 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," the report added.

Finally, there have been a series of structural reform announcements across several sectors over the past few days. These reforms are more medium-term in nature, and therefore the brokerage does not expect these to have an immediate impact on reviving growth. It said that it will continue to monitor their implementation to gauge their effect on the medium-term outlook for the Indian economy.

First Published:May 18, 2020 12:01 PM IST