India:The 3-week lockdown poses downside risks to growth forecasts – Standard Chartered

The 3-week lockdown poses downside risks to Indian FY20 and FY21 GDP growth forecasts. Analysts at Standard Chartered Bank expect monetary and fiscal measures to counter the slowdown in economic activity. USD/INR trades at 75.355.

Key quotes

“The loss of close to 20 working days could reduce GDP growth by a combined 2.0-2.5ppt in FY20 and FY21.”

“We now expect the Monetary Policy Committee to cut rates by 100bps by mid-Q2-FY21. We expect a 50bps repo rate cut to 4.65% to be delivered before or at the April meeting.”

“We see a risk that the central government’s FY21 fiscal deficit will be 1.5- 2.0ppt of GDP wider than the targeted 3.5%. The hit to the central government’s deficit could be offset by the issuance of tax-free bonds to raise long-term money.”