Coronavirus fallout: India's GDP growth may fall to 1.6% in FY21, says Goldman Sachs

India's gross domestic product (GDP) growth may fall to a multi-decade low of 1.6 per cent in FY21 amid the ongoing lockdown due to coronavirus pandemic, Goldman Sachs said. The forecast is lower than 3.3 per cent earlier but still higher than the United States, which is expected to see the economy contracting by -6.2 per cent in 2020 from -3.7 per cent earlier, the financial services company said in a report.

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The growth is expected to be lower than in the times of recession seen in the 1970s, 1980s and 2009, Goldman Sachs said. The spread of the virus, announcements of a nationwide shutdown from March 25, social distancing measures, and fears among consumers and businesses, have all escalated sharply over the past two weeks, the global brokerage added.

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However, India may see a strong sequential recovery in the second half of the fiscal year 2020-21, it also said. "We expect the RBI to continue with its monetary easing policy, along with liquidity infusion measures. While more forceful policy support could present some upside risk, the recovery could further be delayed if the pandemic is not brought under control globally and domestically over the next few months," Goldman Sachs said. The recovery could further be delayed if the pandemic is not brought under control globally and domestically over the next few months, it added.

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Goldman Sachs expects Centre and the states to roll out fiscal stimulus packages. "The fiscal math will be dented by only 0.08 per cent, if we were to include the Rs 1.75 lakh crore package," it said. Meanwhile, India is under a 21-day lockdown currently amid the fast-spreading coronavirus pandemic.