Goldman Sachs Lowers India Growth Forecast As Covid Cases Rise

NOIDA, INDIA – APRIL 11: A woman holds a pot at a Noida Authority food distribution in Morna Village in Sector 35, on the 18th day of the 21-day closure to limit coronavirus, on April 11, 2020 in Noida, India. (Photo by Virendra Singh Gosain / Hindustan Times via Getty Images)

Hindustan Times | Hindustan Times | fake images

A second wave of Covid-19 infections is expected to slow India’s economic recovery in the three months between April and June, according to Goldman Sachs.

On Tuesday, the investment bank lowered India’s growth forecast for the quarter from 33.4% year-on-year previously, to 31.3%. He cited lower consumer and service activity likely due to increased social restrictions being implemented by the Indian state and federal governments to address the new outbreak.

Goldman said it expects gross domestic product (GDP) to contract sequentially by 12.2% quarter-on-quarter on an annualized basis during the three months ending in June, which marks the first quarter of India’s fiscal year that began on January 1. April and ends in March. December 31, 2022. Last year, India entered a technical recession after recording two consecutive quarters of contraction.

“With virus cases rising to a new record of over 100K / day over the weekend, and a number of states, including Maharashtra, announcing tighter lockdown restrictions likely to be extended in the coming weeks, we expect the second-quarter GDP growth is slower than we initially forecast, “Goldman analysts wrote.

Register of high cases

Cases in India have been on the rise since mid-February, and the state of Maharashtra, home to India’s financial capital Mumbai, has been particularly hard hit. On Monday, India reported more than 103,000 new cases over a 24-hour period, surpassing levels seen in September, when the first wave of infection peaked.

On Tuesday, the South Asian nation reported 96,982 new cases, most of them in eight states, including Maharashtra, Chhattisgarh and Karnataka.

Maharashtra authorities stepped up restrictions, including introducing night curfews when only essential services will remain open, as concerns mount about a possible shortage of hospital beds and doctors. Other states are also proactively increasing restrictions to slow the spread of the virus.

On the other hand, India has also stepped up its vaccination efforts. As of Tuesday, government data says the country has administered more than 84 million doses since it launched its mass inoculation program in January.

Some analysts and investors have said that the impact of the recent surge in cases will likely be limited if India can avoid a strict national lockdown like last year.

Strong rebound in subsequent quarters

Goldman expects activity to recover dramatically from subsequent quarters, July-September and beyond, as India’s containment policy normalizes and the pace of vaccination accelerates. Still, the impact of the April-June quarter is likely to affect India’s overall growth projection for the fiscal year, which Goldman now expects at 11.7%, down from a previous forecast of 12.3%.

That said, the investment bank warned that uncertainties around its estimates remain high and that the actual impact could be greater or less, depending on how strict India’s containment policies are and whether they extend to sectors such as construction. and manufacturing.

The impact on GDP can potentially be cushioned by more specific localized restrictions at hotspots rather than a broad-based national lockdown, like the one India launched last year, which had a significant socio-economic impact, according to Goldman.

“The measures have also been more focused and biased towards service sectors such as leisure, recreation and transportation, with little or no impact on agriculture, manufacturing, construction and utilities,” the analysts said, and They added that the bank’s analysis suggested that people have become accustomed to a post-Covid environment, with a shift toward e-commerce and working from home. As such, your response to state containment policies is likely to be less responsive.

Goldman also expects the Reserve Bank of India to maintain its policy rate at 4%, as well as maintain its accommodative stance and an environment with abundant liquidity for longer than expected.


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