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sarah Leo made post

Is it true that BOFA Securities has projected India GDP to contract 6% in FY21?

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vidhya Laxmi answered.
1 week ago

Yes that is correct. BOFA has painted a pessimistic picture of the economy as full-fledged economic recovery in India looks tough and prolonged. In their latest note, BOFA expects the Indian GDP to contract 6% in FY21. They had originally projected a 4% contraction in GDP for FY21. Then now expect restrictions till November, delaying the recovery.

BOFA estimates that one month lockdown wipes out 100 bps of annual GDP. In fact, BOFA has warned that if India has to wait for the vaccine for growth to normalize, then the contraction in FY21 could be as bad as 7.5%. BOFA expects an aggressive cut of up to 100 basis points in the repo rates by the end of FY21.

BOFA expects the Jun-20 quarter to be the worst but that will also mark the bottom of the fall. The Apr-Jun quarter is likely to mark GDP de-growth at -15.2%. Subsequently, GDP growth is anticipated to remain in negative territory for the next three quarters i.e. -5.6%, -2.8% and -1.4% in the three quarters after that. Rural GDP may give some support.