HYDERABAD: Foreign research houses have yet again rung a death knell on India’s economic growth. While Goldman Sachs and Nomura separately estimated real GDP growth to shrink 5 per cent in FY21, US investment management firm Bernstein projected an even sharper negative growth of 7 per cent. In absolute numbers, India’s national output will shrink by as much as Rs 7.3 lakh crore.
It means, if in FY20 real GDP (calculated using base year 2011-12) stood at Rs 147 lakh crore, this fiscal it could settle at Rs 139 lakh crore.Similarly, nominal GDP (calculated at current prices) and the often used metric stood at Rs 204 lakh crore in FY20.
Assuming a 5 per cent negative growth in nominal terms will result in domestic output shaving off nearly Rs 10 lakh crore taking GDP to Rs 194 lakh crore in FY21. Worryingly, this time, if the negative growth forecasts turn out to be true, India will see the harshest recessions it has ever experienced.
"There have been a series of structural reform announcements across several sectors over the past few days. These reforms are more medium-term in nature, and we, therefore, do not expect these to have an immediate impact on reviving growth," noted Andrew Tilton and Prachi Mishra of Goldman Sachs.
During the current quarter (Q1), Goldman pegged an unusual fall in GDP at 45 per cent over the previous quarter. Earlier, it projected the decline to be 20 per cent. The good news is, it expects an equally sharper rebound Q2 at 20 per cent over, and Q3 and Q4 at 14 per cent and 6.5 per cent, respectively.
As for the Rs 20 lakh crore economic package announced, Goldman Sachs believes it won’t have any immediate impact on the economy. "These structural reforms are more medium-term in nature, and we don’t expect these to have an immediate impact on reviving growth," it said.
Bernstein, too, didn’t mince words. "The desire to announce a large economic package, something that shows the world that they care about the economy and are willing to match global stimulus numbers, was perhaps the driver for the claim of a large package," noted Venugopal Garre, Ankit Agrawal, and Ranjeet Jaiswal of Bernstein adding, "While the package started on important aspects but the need to announce measures that add up to this top-down number, made the entire package aimless, with several generic announcements which should ideally, have been a part of a normal economic agenda. Overall, we see it as a lost opportunity."
According to them India doesn’t have fiscal buffers and hence a large fiscal stimulus would have been a bold bet. Instead, the government, it said, took an easier path.
"The focus should have been on urban, corporates, consumption, infra and impacted sectors, but it was on rural and strange-end markets such as space program. Rural is in control, as farm incomes are protected (good harvest season and a good start to summer crop sowing). Yet, several measures (in the form of loans) were announced for Agri, some of which are already existing programs," they wrote.
While the overall plan lacked substantive decisions to support consumption and promote manufacturing, the authors noted that even broader reforms lacked the spark.