INSUBCONTINENT EXCLUSIVE:
MUMBAI: Within two days, brokerage Bank of America Securities has sharply cut the June quarter growth forecast by 90 bps to a low of 3.1 per
cent and the full-year India GDP target by 100 bps to 4.1 per cent for FY2021, citing an almost certain global recession due to the Covid-19
pandemic.
On Wednesday, Bank of America Securities India had sharply projected down its June quarter growth by 80 bps to 4 per cent and the
March quarter of the current fiscal by 30 bps to 4 per cent, citing the coronavirus-driven shutdowns.
It had also pegged full-year FY2021
growth at 5.1 per cent citing a likely fall in global growth to a low 2.2 per cent.
And Thursday's forecast is another 90 bps down from
the previous projection for the June quarter growth and a full 100 bps for the full-year uptick from 5.1 per cent.
When it comes to the
Indranil Sen Gupta and Aastha Gudwani expect the pandemic-driven lockdowns to run through end-April, crippling domestic economic activities
by a sharp 90 bps to 3.1 per cent for the June quarter of FY21 and by 40 bps to 4.7 per cent for the full-year
in at 6 per cent.
Explaining the rationale for the doom-scenario, they say a global recession is a reality due to the escalation in the
Covid-19 pandemic and the general shutdown in India is seen extending further to the end of April and not mid-April.
Calling for a global
This will leave the US contracting 0.8 per cent and the global growth engine China plunging to a paltry 1.5 percent in 2020.
Penciling in a
100 bps rate cut through the course of 2020, they say this is needed as the real lending rates are still persisting at high levels for long
now as falling demand is curtailing the pricing power of corporates further which in turn will longer the shutdown, speed up global
country include elongation of the domestic shutdowns, weakening of corporate balance sheets at a time G-3 central banks are running out of
ammunition.
They basis their argument to the India troubles, despite it being a domestically-driven economy, to the fact that contagion does
still travel through disruptions in financial markets as it was seen in 2008.
On the impact of the high real rates and the falling pricing
power, given the steeply falling consumer demand, they said high real lending rates are likely to persist with falling demand curtailing
corporate pricing power.
Although nominal MCLR has come down by 54 bps so far, on RBI easing the real MCLR has jumped by 67 bps with
2.5 percent in 2H of FY21
durable liquidity in FY21 atop the USD 76.4 billion so far.
They also expect a reasonably strong rupee as the reasonably high forex reserves
should prevent a speculative attack on the unit