Goldman Predicts Recession For India As Consumption Takes A Hit

India’s economy is expected to shrink in the first two quarters of the year with consumption, which comprises almost 60 per cent of the economy, taking a severe hit due to lockdown

(Representational Image, Source- Getty Images)

New Delhi:  Amid the worst crises for economies around the world due to Covid 19 outbreak, Goldman Sachs has predicted that India’s economy is expected to shrink in the first two quarters of the year with consumption declining due to nationwide lockdown. In the latest report, Goldman Sachs predicted gross domestic product to fall at annualized 1.4 per cent on a quarter-on-quarter basis in the first quarter and 3.8 per cent in the second quarter. This dip in GDP will pull down growth in the fiscal year March 2021 to 1.6 per cent. According to economists Prachi Mishra and Andrew Tilton, who drafted the report, the pandemic has caused “an unprecedented sudden stop” to activities in India, especially consumption which comprises almost 60 per cent of the economy. It went on to predict that Reserve Bank of India (RBI) will cut the interest rates by 50 bps or basis points. However, the report mentioned that the country’s fiscal response has to be temporary, targetted and carefully calibrated. The report has added that 25 per cent activity in India will be severely impacted or collapse due to lockdown. "Three-week lockdown would be a 220 bps reduction in growth. An additional 150 bps reduction in India growth will be due to reduction in global growth," said the report. On revival, it said the second half of the fiscal year can witness recovery depending on phase-wise lifting of the current lockdown besides monetary and fiscal measures. The government has so far injected stimulus of 0.8 per cent of GDP, while RBI has cut interest rates by 75 basis points and injected cash amounting to 3.2 per cent of GDP since February.