Investment banks upbeat on growth rebound

Goldman Sachs and Morgan Stanley, multinational investment banks, have appeared hopeful about India's economic growth and have predicted a significant revival next year as economic activity gains traction and vaccine deployment is undertaken to address the anticipated Covid-19 pandemic.

In FY22, we expect GDP growth to recover to 13% (above consensus estimates of 10.9%), following an anticipated contraction of 10.3% in FY21. There is still a high degree of uncertainty around the outlook and growth could significantly overshoot or undershoot these estimates, depending on the path taken by the virus and vaccine-related developments in the coming year, Goldman Sachs said in a note entitled ‘Vaccine to Extend Rebound in 2022’.

Because of the damaging effects of one of the strictest lockdowns to prevent the spread of the deadly virus, the US investment banking giant had previously projected the Indian economy to contract 14.8% in 2020-21. The government's effort to revive economic activity has seen a sharp boost in a number of economic indicators, and there are forecasts now that in the third quarter, sooner than estimated, the economy will move into positive territory.

Morgan Stanley retains a positive view of the economy and expects growth to rebound in the second quarter of 2021.

“We expect a stronger growth rebound in 2021, with GDP growth rising to 9.8% from a projected 5.7% contraction in 2020. We estimate that the economy has returned to a pre-pandemic production stage in 4Q20. A still accommodative monetary policy stance should help the cyclical growth force,” Morgan Stanley stated in a note.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.