Swiss brokerage UBS has sharply cut its 2020-21 gross domestic product (GDP) growth forecast for India to 5.1 per cent based on fears around the coronavirus outbreak and weak domestic credit growth. It also cut its growth estimate for 2019-20 marginally to 4.8 per cent. The weak credit impulse domestically could constrain growth for the next two quarters, it said.

UBS economist Tanvee Gupta Jain said even though there are only over 50 positive coronavirus cases in India so far, the fear and uncertainty over its impact could worsen near-term consumer sentiment and hit domestic demand, Indian media reported.

Additionally, there will be sectoral impact on production due to shortages of inputs in electronics, pharmaceuticals and automobile sectors or reduced external demand on slowing global growth, which would also have a bearing on India’s growth outlook, she explained.

The growth rate will continue to be under potential in 2021-22, when it is expected to touch 6 per cent, UBS said.

The brokerage said it has already taken into account the benefits of the oil prices decline while making its estimate. Courtesy the lower growth, India will continue to be constrained fiscally even in fiscal 2020-21, it said, expecting the government to breach the budgeted fiscal deficit target for the financial year.

There will be a 0.30 per cent slippage on the crucial number during the next fiscal over the 3.5 per cent aspiration, it added.

Fibre2Fashion News Desk (DS)

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