Indian economy can contract 2.6%; US over 11% in worst case in 2020: Nomura

The coronavirus (Covid-19) pandemic is likely to hit the global economy, including India, hard over the next few months. With nearly 75 per cent of the Indian economy in lockdown mode, Nomura has lowered the 2020 GDP growth forecast to -0.5 per cent year-on-year (y-o-y) from 4.5 per cent.

“We now expect GDP growth to slide from 4.7 per cent y-o-y in Q4 2019 to 3.1 per cent in Q1 and plunge to -6.1 per cent in Q2, when both domestic and external demand will weaken. We are building in a sequential pickup in the second half of 2020, but the pace of recovery is likely to be much weaker given some lasting damage to potential output,” wrote Sonal Varma, managing director and chief India economist at Nomura in a co-authored report with Aurodeep Nandi titled 'COVID-19’s impact on the world economy'.

In its worst case projection if the Covid-19 pandemic becomes a full-blown credit crisis for India, corporates find it difficult to stay afloat, and banks struggle with the balance sheet fallout, Nomura expects GDP growth in Q2 to fall to -10.3 per cent y-o-y and - 1.5 per cent in H2-2020. That apart, rising unemployment, loss of income and disenchantment against the draconian measures may even lead to social unrest, Nomura says. Read More