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Thursday, June 24, 2021

Goldman Sachs sees recovery for India’s economy by 2021

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Even as the number of COVID- 19 cases are on the rise due to gradual unlock throughout the economy, economists are reworking their growth forecasts indicating an earlier than expected revival of the economy as the economy is finding its way back on track.

After the Japanese research firm Nomura finding some green shoots of recovery in September, now American investment bank Goldman Sachs, is seeing a full-bound recovery by 2021. Even ratings firm India Ratings has forecast a revival in FY’22.

” While the economy must now climb out of a deeper trough in 2020, we have upgraded our expectations of a rebound next year” say Goldman Sachs’ India economist Prachi Mishra and Andrew Tilton. ” In Q2 2021, we expect real GDP growth to bounce back sharply on a year-over-year basis due to favorable base effects”

Goldman Sachs assumes that 70% of the lost output in June 2020 is recovered in June 2021. Real GDP in Q2 2021- April-June 2021 is pegged at 27.1% y-o-y. Going forward, assuming a step down to more normal levels of sequential growth, Goldman expects average annual GDP growth in calendar year-CY21 and fiscal year-FY22 at 9.9% and 15.7% respectively (relative to 3.8% and 7.0% before). “Our forecasts assume that in level terms, real output in March 2022 would still be ~2% below its level in March 2020” the economists said.

The optimism in growth forecasts assumes significance amidst debates on whether India has done better than the US economy during the April-June’20 quarter during which the global economy including India faced the worst ever economic crisis due to the spread of the COVID-19 pandemic.

Ratings firm India Ratings, which expects FY’21 GDP to contract 11.8 per cent in FY’21, has forecast a rebound of 9.9 per cent in FY’22.

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