Bank of America Merrill Lynch (BofAML) has cut its India growth forecast by 90 basis points to 3.1 percent from 4 percent in the March quarter, due to shutdowns in various districts to contains COVID-19 outbreak. It has also reduced its GDP estimates by 40 bps to 4.7 percent for FY21.
It also said that it estimates that a month’s shutdown will cost about 50 bps of annual GDP.
“We have now factored in the extension of shutdowns to contain the COVID 19 virus outbreak into April-end from mid-April. We will review the situation in end-March. We estimate that a month’s shutdown will cost about 50 bps of annual GDP,” the BofAML report stated.
The Centre and state governments have decided to completely shut down 75 districts across the country where coronavirus (covid-19) cases have been reported. The number of positive cases reached 415 with three more deaths taking the toll to seven.
The brokerage also expects this pandemic to lead to a global recession and has cut the 2020 global growth rate forecast by 180 bps to 0.4 percent on rising cases of coronavirus.
Back home, it also noted that it expects the Reserve Bank of India to cut its benchmark repo rate by 100bp in FY21 with inflation set to drop to 2.5 percent in the second half of FY21. It sees 25 bps cut each on/before April 3, June, October and December.