GBP/INR is bullish on Monday, but the pair is still trading close to the lowest level since March 27. Currently, one British pound buys 91.933 Indian rupees, up 0.31% as of 7:00 AM UTC. While this is the largest single-day gain since the start of the month, the move doesn’t necessarily point to a trend reversal, as larger timeframes still display a steep downtrend that started in mid-April at above 96.000.
Goldman Downgrades India’s GDP Outlook
The mood surrounding rupee has deteriorated after US-based banking giant Goldman Sachs said that India would experience the worst recession in its history. The investment bank cited a series of data that stress the damaging impact of the lockdown measures imposed by the government at the end of March.
India’s gross domestic product (GDP) will contract by as much as 45% in the second quarter compared to the previous quarter, down from Goldman’s prior outlook of a 20% drop. Nevertheless, the bank expects a stronger rebound of 20% in the third quarter, while forecasts for the last three months and the first quarter of next year remained at the same levels of 14% and 6.5% respectively.
Goldman economists Prachi Mishra and Andrew Tilton explained in a note that the estimates suggested that real GDP would drop by 5% in the fiscal year 2021, which is way deeper than any recession India has seen.
While India’s Finance Minister Nirmala Sitharaman announced major reforms and a rescue package worth $265 billion, the immediate impact cannot be avoided. The Goldman economists said:
“There have been a series of structural reform announcements across several sectors over the past few days. These reforms are more medium-term in nature, and we therefore do not expect these to have an immediate impact on reviving growth. We will continue to monitor their implementation to gauge their effect on the medium-term outlook.”
Elsewhere, the UK is gradually easing some of the restrictive measures amid the pandemic. Still, the economy is unlikely to experience a rapid rebound, the Office for Budget Responsibility (OBR) says. Nevertheless, OBR chairman Robert Chote noted that April was probably the bottom.