Goldman Sachs predicts a greater recession by March 2021. Here is a report on India’s economic performance in the month of September 2020.
India witnessed a historic drop in GDP by 23.9% in April-June 2020 after nationwide lockdown was imposed to save lives from Covid-19 spread. While the country is talking about the movement of the economy being in a recovery phase, Goldman Sachs released a report on the Indian economy predicting a further contraction in economic growth.
Following are the key takeaways from the Goldman Sachs’ recent report and predictions about the Indian economy:
- Indian economy is expected to contract by 14.8% in the fiscal ending March 2021. Compared to the earlier predicted 11.8%, this is the most low-lying prediction forecast so far.
- Contraction of the economy is estimated at 13.7% in the second quarter and 9% in the third quarter.
- Contraction of the economy in the calendar year 2020 may come down to 11.1%.

These predictions are based on another wave of coronavirus that is expected to hit India in the winters. The festive season of India will undoubtedly witness heavy gathering. This, when clubbed with a high number of respiratory problems during winters, can result in a drastic upsurge of cases.
Goldman Sachs’ report predicts further contraction in India’s economic growth.
India is reporting 75000 cases of coronavirus in a day shooting the aggregate to 7 million cases nationwide. As per State Bank of India’s report, during the April to June 2020 period, revenue deficit of Budget Estimates in April-June went up to 285% collectively in 18 biggest states of India. This was the result of steeply falling revenues and central grants.
Is The Indian Economy Recovering?
The figures from financial performance of the country in the month of September indicate that the economy is on a recovery trend. Automobile companies like Maruti and Hyundai reported an increase in sales in the month of September by 33% and 4% respectively. Tractors sales for Mahindra & Mahindra went up by 17% and Bajaj auto registered its highest export ever last month.
India’s financial performance in the month of September indicates that the economy is on a recovery trend.
However, the credit profile of corporates in India has hit the lowest in 10 years and the situation doesn’t seem to improve anytime soon. The banking sector’s credit growth, according to CRISIL, will experience its slowest pace in a decade at 1% in 2020-21. UPI transactions also increased by 12% in the month of September. Total transactions amounted to Rs 3.29 lakh crore in September which is almost 10% more than Rs 2.98 lakh crore in August.
Watch: Goldman Sachs’ Prachi Mishra on the state of the Indian Economy
Correlation with decreasing credit growth of banks and increasing UPI transactions
Credit growth of banks has plummeted significantly. Indian banks are now experiencing slowest growth in credits by just 1% in 2020-21. However, the Unified Payment Interface (UPI) transactions increased drastically in the last month. This concluded that Indian households are increasingly spending their savings instead of borrowing from banks which is not a good sign for the economy. Increasing saving expenditure and decreasing bank credit growth are debacles in the economic lingo.
Indian banks are now experiencing slowest growth in credits by just 1% in 2020-21.
Growth in bank credits is a direct indicator of increase in economic activities in the country, which is expected to contract by 10% in FY 21. Sales of petrol has increased by 2% in the month of September which is the first increase since the lockdown in March. Diesel consumption, however, decreased by 7.3% in September. This indicates that private consumption of energy is growing again.
However, the commercial transportation and movement is back on an upward trend which indicates low economic activities. Similarly, the Manufacturing PMI (Purchasing Managers Index) recorded the highest growth in 8 years at 56.8%. But the job scenario in India still remains unpromising due to social distancing norms.
So if you think 2020 was a nightmare for the Indian Economy, better prepare for the hell in store for 2021.
