New Delhi: In an already looming economic environment, financial agencies Goldman Sachs and Fitch on Tuesday forecast economic contraction for India in the financial year 2021, deeper than what was previously estimated. While the investment bank Sachs anticipates the gross domestic product to shrink by 14.8 per cent, the credit-rating agency Fitch estimates a contraction of 11.8 per cent this financial year.
Both the reports stated the limited financial support, fragilities in the financial system and a continued rise in COVID-19 cases are hampering the normalization of economic activity in the country. The latest estimates by Fitch and Goldman Sachs are among the worst for the Indian economy this fiscal. Japan’s independent financial holding company Nomura also estimated an 11 per cent contraction, as against 6.1 per cent it previously held.
As a result of the COVID-induced lockdown, Indian economy shrank by a massive 23.9 per cent in the April-June quarter of 2020-21, the data from the Ministry of Statistics and Programme Implementation (MOSPI) read. The contraction, which is the biggest ever on record, is the worst among G20 nations and significantly below the expectations of many economists.
In light of the April-June quarter GDP report, Sachs made significant adjustments to their GDP forecasts for India. “We now forecast Q3 (September quarter) 2020, and Q4 (December quarter) 2020 at GDP growth of -13.7% and -9.8%, respectively (against -10.7% and -6.7% previously). Our estimates imply that real GDP falls by 11.1% in the calendar year 2020, and by 14.8% in the financial year 2020-21 (vs. growth of -9.6%, and -11.8% in our previous forecasts),” Goldman Sachs said in a research note.
Fitch, on the other hand, predicted a contraction of 11.8 per cent as against 5.3 per cent according to previous estimates. Principal economist of India Ratings and Research, Fitch’s domestic-arm, Sunil Kumar Sinha said, “All indicators, be it mobility or consumption, are pointing towards much weaker-economic recovery.” The economy is projected to contract 11.9% in the current (September) quarter, followed by a contraction of 6.7% in the December quarter and 5.4% in the subsequent quarter, Sinha said, citing the adverse impact of COVID-19.
Chief Economic Adviser K V Subramanian, while giving a statement on the latest GDP figures said, “The number is on expected lines, the global economy has taken a hit, India is not isolated. India is seeing a V-shaped recovery, agriculture has seen an uptick and it will continue to do so.”