'Worst hit': Goldman Sachs paints gloomy picture for Indian economy, GDP to contract 14.8% in FY21

The Indian economy is the worst-hit among major economies, American brokerage Goldman Sachs said on Tuesday sharply cutting its 2020-21 GDP forecast to a contraction of 14.8%.

It had earlier estimated that the economy of the country, which is now home to the second-largest number of COVID-19 infections, to contract by 11.8%.

The estimate comes days after official data said the economy contracted by 23.9% for the June 2020 quarter, compared to the level it was at in the year-ago period as activity across all sectors barring agriculture contracted due to the lockdowns. The nearly two-month-long lockdowns chilled economy activity but was unable to contain the number of infections, which stands at 40 lakh.

"India''s GDP (gross domestic product) hit from COVID-19, the highest across major economies," the analysts at the brokerage said.

They now believe that the economy will contract 13.7% for the September 2020 quarter and 9.8 per cent for the December 2020 quarter, as against the 10.7% and 6.7% contractions, respectively, estimated earlier.

"Our estimates imply that real GDP falls by 11.1% in 2020, and by 14.8% in FY21," they added.

The 14.8 per cent contraction in 2020-21 is among the most pessimistic one among all the analysts till now.

Earlier in the day, analysts at India Ratings and Research revised down their estimate to an 11.8% contraction for 2020-21, while economists at largest lender SBI are now expecting a 10.9% contraction.

Like other analysts, the brokerage said there will be a sharp rebound in 2021-22 because of the low base and estimated the GDP to clock a 15.7% growth in the next fiscal year.

Assuming 70% of the lost output in June 2020 is recovered in June 2021, they are expecting a real GDP growth of 27.1% in the April-June 2021 quarter.

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