Goldman Sachs estimates India’s GDP growth rate at 1.6%, predicts RBI will reduce interest rates by another 50 basis points

Business News, Nation, (New Delhi), April 8:-Goldman Sachs has revised India’s growth forecast to 1.6 per cent downgrading it by over 400 basis points.

The report also predicted that “25 per cent of activity in India will be wiped out due to the lockdown.” India imposed a nationwide quarantine for three weeks in order to curb the spread of the novel coronavirus.

“Three-week lockdown would be a 220 bps reduction in growth. Additional 150 bps reduction in India growth will be due to reduction in global growth. Estimated India’s GDP growth will be at 1.6 percent,” said the report.

Goldman Sachs also predicted that RBI will further reduce the interest rates by 50 bps. “India’s fiscal response has to be temporary, targetted and carefully calibrated,” read the report.

The forecast further stated that India’s economy will likely contract in the first two quarters of the year as consumption plunges during a three-week lockdown to contain the coronavirus outbreak.

The virus pandemic has brought “an unprecedented sudden stop” to activity in India, where consumption makes up 60 per cent of the economy, the economists who prepared the report said.

Goldman expects a strong sequential recovery in the second half of the fiscal year based on a staggered removal of the ongoing nationwide lockdown and further monetary and fiscal support.

Prime Minister Narendra Modi’s government has so far provided virus-relief stimulus of just 0.8 per cent of GDP, while the central bank has cut interest rates by 75 basis points and has injected cash worth 3.2 per cent of GDP since February.

-(NAV, Inputs: Agencies)

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