India’s economy set to contract by 45%, Goldman says
Amy Kazmin in New Delhi
India’s economy is set to contract by 45 per cent in the April-June quarter from the previous quarter, hammered by one of the world’s most draconian coronavirus lockdowns, which brought virtually all economic activity to an abrupt halt, Goldman Sachs has forecast in a new report.
However, the investment bank said that the economy would probably rebound strongly — growing 20 per cent quarter on quarter in the July-August quarter — as restrictions ease in the coming months. After that, it said recovery would be slower.
Overall, the bank has forecast that India’s gross domestic product will contract by 5 per cent in the current April to March financial year, which would mark the deepest recession that India has ever recorded.
Prime Minister Narendra Modi last week announced a $266bn “economic support package” to help revive the economy, but much of the support is in the form of liquidity measures to encourage banks to lend to struggling companies, with minimal additional fiscal stimulus.
Bombay’s Sensex fell 2.2 per cent in early morning trade due to investor disappointment with the relief package.
In its report, Goldman Sach’s called New Delhi’s support for economic revival “tepid compared to other emerging economies, and far less than most advanced economies”.
Mr Modi’s government abruptly ordered the suspension of virtually all economic activity — except that related to the production of food, pharmaceuticals, and cleaning and hygiene products — in late March in a bid to stop the spread of coronavirus.
Despite these tough measures, India’s infection load continues to grow steadily, with no sign of a downturn, as the virus spread through densely populated slums and working class neighbourhoods. India has over 95,660 confirmed coronavirus infections, which have so far claimed the lives of 3,000 people.
Mumbai and the heavily industrialised states of Gujarat are the worst affected by the virus.
As the costs of the draconian lockdown have become more clear, Mr Modi’s government is now trying to ease restrictions to try to revive the struggling economy, while maintaining tough controls in designated containment zones, with high levels of cases.