A faster than expected recovery in economic activities - thanks to a slew of government reforms - has encouraged economists to revise their growth estimates for India in FY21 upwards.
The Central Statistics Office (CSO) is likely to release the GDP data for the July-September quarter of FY20-21 on November 27. Hit by the COVID-19 pandemic and subsequent nationwide lockdown, India reported a contraction of 23.9 percent in Gross Domestic Product (GDP) for the April-June quarter.
Here are some noteworthy GDP forecast revisions:
SBI
SBI has revised India’s Q2FY21 GDP forecast. It now expects a contraction of 10.7 percent from an earlier estimate of 12.5 percent.
Upward revisions reflect faster recovery. It believes estimates would have been even better if July and August had shown even a little bit of traction.
SBI Business Activity Index shows that there is continuous improvement. Q3FY21 numbers could be even better, it said.
Goldman Sachs
Goldman Sachs upgraded its India GDP forecast to a contraction of 10.3 percent in FY21, as against its earlier estimate of a contraction of 14.8 percent. The research house said developments on the vaccine front -- where two candidates have posted satisfactory progress -- will be very helpful in the recovery.
The GDP will stage an impressive recovery in FY22, with a growth of 13 percent on the low base and benefits of the vaccine, Goldman Sachs said in a report.
“There is still a high degree of uncertainty around the outlook - and growth could significantly overshoot or undershoot these forecasts - depending on the course taken by the virus and vaccine-related developments in the coming year," it said.
A meaningful rebound in economic activity will happen from 2021 itself, it said, adding that consumer-facing services sectors will stage a faster recovery.
Moody’s
Moody’s Investors Service upped India's growth forecast to (-) 10.6 percent for the current fiscal, from its earlier estimate of (-) 11.5 percent, saying the latest stimulus prioritises manufacturing and job creation and focuses on longer-term growth.
For next fiscal 2021-22, Moody’s projected India to grow at 10.8 percent, as against the previous estimate of 10.6 percent.
According to Moody’s, India’s economic growth is expected to settle around 6 percent in the medium term. “We forecast government debt to increase to 89.3 percent of GDP in fiscal 2020 and decline to 87.5 percent in fiscal 2021, from an already elevated 72.2 percent in fiscal 2019,” the global rating agency said.
Moody’s said the latest measures aim to increase the competitiveness of India’s manufacturing sector and create jobs while supporting infrastructure investment, credit availability and stressed sectors. As such, they present potential upside to our current growth forecasts, a credit positive, it added.
Barclays
Barclays has revised its FY21 GDP forecast downwards to -6.4 percent from -6 percent earlier, to reflect the marginally weaker incoming data than it had earlier anticipated. However, Barclays raised its FY22 growth forecast to 8.5 percent from 7 percent to reflect a faster recovery in services amid continued policy support.
Barclays has forecast that growth in GDP will resume in Q4CY20 (October-December).
“Assumptions supporting our more optimistic view of 2021 include no national lockdown, even if there is a resurgence in Covid cases, a vaccine is finalised and starts being distributed sometime in H1 (January-June) 2021, and monetary/fiscal support remains broadly intact through the year,” Barclays said in a report said.
Morgan Stanley
Morgan Stanley’s Chetan Ahya expects India’s Gross domestic product (GDP) growth to return to pre-COVID levels by Q1 of FY22.
“That’s the time when the central bank should begin to think about taking back some of the extraordinary support that they are providing to the economy,” he told CNBC-TV18.
According to him, India’s GDP may contract by 5.7 percent in 2020 and rebound to 9.8 percent in 2021.
Fitch Ratings
Fitch Ratings believes that the revival of the central government’s reform agenda in response to the coronavirus pandemic shock has the potential to raise India’s medium-term growth rate.
In recent years, the Indian authorities’ strategy to keep the public debt ratio and broader public finances under control has relied heavily on expectations of sustained rapid nominal GDP growth, it noted.
Several reforms passed by parliament since the pandemic set in could lift medium-term growth prospects. A wide-ranging privatisation push involving large SOEs could be transformative, it added.
Fitch expects the government to stay reform-minded over the next few years, at both the central and state level, but said that implementation risks were significant.
ICRA
Credit Rating agency ICRA has said that the contraction in India's GDP may be narrowed down to 9.5 percent in the second quarter of the current financial year. The GDP contraction for the April-June quarter was 23.9 percent.
