JP Morgan chief economist forecasts 'strong rebound' in Indian markets

The economic wounds will be "deeper than anything we've seen since World War Two", says chief economist at JP Morgan.

Global investment bank JP Morgan is forecasting a "very strong rebound" in Indian markets for the second half of the year while it remains "worried" about what it describes as deterioration in the country's public finances, social disruption and the limits of public financing in the long slog back from the coronavirus crisis.

"India is going to be going through a very difficult first half of the year. We have GDP down in the second quarter, 35 per cent annualised pace but we have a very strong rebound in the second half of the year, but one that still doesn't get you back to where you were," said Bruce Kasman, chief economist at JP Morgan, news agency IANS reported.

Kasman leads a team of thirty economists worldwide who set the bank's economic and policy views.

Globally too, JP Morgan warned on Tuesday that whatever rebound happens in the second half of 2020 won't be strong enough to undo the damage absorbed during the first deadly blow from Covid-19.

The economic wounds will be "deeper than anything we've seen since World War Two", Kasman said. "At the same time, it's going to be very short lived."

Kasman thinks the Reserve Bank of India is "almost done but not completely done" with the easing of its key interest rate.

"We have a bottom in the policy rate forecast, 3.75 (per cent) very close to where we are now, Kasman said.

India's central bank has cut its key interest rate to 4 per cent to counter the economic blow from the coronavirus pandemic.

Income and job losses are going to have a "lasting effect" on consumer behaviour, Kasman said.