No rate cut, all eyes on RBI's GDP projection

Lower inflation next year may open the space for rate cut, but for now the challenge is seeing through the government borrowing and keeping the bond yield low

Early September, when the National Statistical Office announced that India’s gross domestic product (GDP) for the first quarter of the current fiscal year had contracted by 23.9 per cent, almost every analyst and her aunt rushed to revise their GDP projections downwards. Roughly, the projections now range between 8 per cent and 12 per cent contraction of the GDP for FY2021.

Of course, there are outliers such as Goldman Sachs, the US investment bank and financial services company, which expects India’s economy to contract 14.8 per cent in 2021, the lowest forecast so far, compared with 11.8 per cent predicted earlier.