Goldman Sachs, Nomura lower FY21 GDP estimate for India

Andrew Tilton, Goldman Sachs' chief Asia-Pacific economist, in a co-authored report with Prachi Mishra forecast an average headline CPI inflation for FY21 at around 4 per cent, which also is the RBI’s medium-term target. Rising food prices in the short-run, they believe, would likely be offset by lower fuel prices and a lower core amidst the eight-week nationwide lockdown. “Over the course of the year, we forecast food prices to ease, while the core picks up as the economy recovers sequentially,” Goldman Sachs said.

In this economic backdrop, Goldman Sachs expects the central bank to cut rates by 100 basis points (bps) between now and the third quarter of calendar year 2020 (Q3-2020), as compared with their earlier forecast of 50 basis points. Markets, they believe, are pricing in a cut of 50 – 75 basis points.

Those at Nomura, on the other hand, have lowered their GDP growth forecast for India to a negative 5 per cent / 5 per cent contraction y-o-y (from - 0.5 per cent forecast earlier) for 2020, but raised it to 7.9 per cent (from 7.3 per cent forecast earlier) for 2021.