Goldman Sachs Raises India GDP Forecast 2020-21

Goldman Sachs revised upwards its FY21 growth forecast for India to a 10.3% contraction, from -14.8% it had projected in September, according to a report released on Tuesday. As announcements of effective vaccines begin to tak

BY Realty Plus
Published - Friday, 20 Nov, 2020

Goldman Sachs Raises India GDP Forecast 2020-21

Goldman Sachs revised upwards its FY21 growth forecast for India to a 10.3% contraction, from -14.8% it had projected in September, according to a report released on Tuesday. As announcements of effective vaccines begin to take hold of the global pandemic rhetoric, the investment bank projected India’s GDP to rebound to 13% in the next fiscal, compared with 15.7% estimated earlier. This should allow a meaningful activity rebound in 2021, particularly in consumer-facing services sectors, where activity remains significantly below pre-Covid levels, it said. Overall, we expect real GDP growth to rebound to 13% in FY22 (above consensus expectations of 10.9%), after an expected -10.3% contraction in FY21,” the report said. The latest revision marks the second such upgrade in India’s FY21 performance by a global institution. Recently released indicators of economic activity have shown promising signals of a recovery with the Index of Industrial Production (IIP) entering positive territory for the first time in six months in September, recording a 0.2% growth. Further, the Purchasing Managers’ Index (PMI) for manufacturing hit a record 13-year high of 58.9 in October, while services PMI touched 54.1 for that month, marking the first month of post-lockdown growth for the sector and taking the composite index to 58. Inflation is likely to decline back to the midpoint of the RBI’s target band of 2-6% by mid-2021, Goldman Sachs said as “food prices to fall on the back of the abundant monsoon, continued compression of retail margins as mobility constraints ease, and favorable base effect”. Goldman Sachs pegged the fiscal deficit at 8% of GDP this year, which should narrow to 6.5% in FY22. Similarly, the combined deficit of Centre and states is expected at 11.5% in the current fiscal and likely to drop to 9.5% next year.