(Bloomberg) -- Citigroup Inc. sharply lowered its forecast for India's economy as the coronavirus pandemic shows no sign of slowing.
The nation's gross domestic product will contract 6% in the fiscal year to March 2021, steeper than Citi's previous estimate for a 3.5% decline, its analysts led by Samiran Chakraborty, chief India economist in Mumbai, wrote in a report to clients. The revision is largely due to a cut to the fiscal first-quarter forecast -- with the economy seen slumping 21% during the period against 16% estimated earlier.
India imposed the world's largest lockdown from the end of March to curb the Covid-19 pandemic, only to reopen some parts of the economy a month later to avoid losses to businesses and jobs. The number of infections has since increased rapidly, making India home to the world's third-biggest tally of virus cases.
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“The delay in flattening the curve has been one of the primary reasons for our forecast revision,” Chakraborty and Baqar M. Zaidi wrote. “The spread of the virus has largely followed the ‘Most Severe' scenario in our forecasts.”
Citi's estimate is severe than the International Monetary Fund's forecast for a 4.5% decline this year and Goldman Sachs Group Inc.'s prediction for a 5% contraction.
Consumer and business sentiment is likely to remain low in the second quarter, the Citi economists said. Return of economic activity to pre-pandemic levels is likely to happen in the third quarter, but sustained return to earlier economic growth rates may take much longer.
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