India’s economy may contract over 40% in Q1FY21: Report

India’s economy may contract over 40% in Q1FY21: Report

India’s Gross Domestic Product (GDP) will contract over 40 per cent in the first quarter of the current year, said SBI Research after the government extended the lockdown to May 31.


“We now believe that Q1GDP FY21 loss will be humongous and could even exceed 40 per cent,” the note added.


The research paper, however, predicts a sharp rebound in Gross Domestic Product (GDP) in the second quarter of the year, but only if the demand equation improves.


“Q2GDP numbers could witness a smart recovery and clock 7.1 per cent if we are able to sustain the demand.”


However, the research also says that the outlook could change rapidly as income and job loss “propel” people towards a “lower equilibrium after the initial bump up.”


“We thus believe the government might be looking at the data more closely to prevent such loss in momentum in Q3 and Q4 and even come up with another targeted package later in the year,” SBI Research said.


It also warned that new cases are likely to peak somewhere anytime in the last week of next month, beginning June 20.


The research notes that cases are expected to witness a “steep fall” till the beginning of August, following which the curve is expected to flatten by mid-September.


Earlier, Goldman Sachs had predicted India's economic growth to shrink as much as 45 per cent in Q1FY21.