Goldman Sachs expects India will experience its deepest recession ever after a poor run of data underscored the damaging economic impact of lockdowns in the world’s second-most populous nation.
Gross domestic product will contract by an annualized 45% in the second quarter from the prior three months, compared with Goldman’s previous forecast of a 20% slump. However, a strong rebound of 20% is seen for the third quarter, while projections for the fourth quarter and first of next year are unchanged at 14% and 6.5%.
This translates to real GDP falling by 5% in the 2021 fiscal year, which would be deeper than any other recession India has ever experienced, as per the note by Goldman economists.
India’s government has extended its nationwide lockdown until May 31, while further easing restrictions in certain sectors to boost economic activity, as coronavirus cases escalate across the country.
The announcement followed Finance Minister Nirmala Sitharaman’s fifth briefing in as many days, in which she outlined details of the country’s $265 billion virus rescue package, which is equivalent to 10% of India’s GDP.
“There have been a series of structural reform announcements across several sectors over the past few days,” the Goldman economists wrote.
“These reforms are more medium-term in nature, and we therefore do not expect these to have an immediate impact on reviving growth. We will continue to monitor their implementation to gauge their effect on the medium-term outlook.”