India’s GDP may have contracted less than earlier estimated in FY21, the State Bank of India said in its Ecowrap report on Tuesday. While the Central Statistics Office (CSO) in February estimated Asia’s third largest economy to have contracted by 8% in FY21, SBI now projects the Indian economy actually may have shrank by 7.3%.
“Based on quarterly GDP numbers in FY21 and full year FY21 GDP estimates, Q4GDP was projected to reveal a contraction of 1.1%. Based on SBI Nowcasting model the forecasted GDP growth for Q4 would be around 1.3% (with downward bias). We now expect GDP decline for the full year to be around -7.3% (our earlier prediction: -7.4%)," SBI said in the report.
The CSO will release its provisional estimates of GDP for FY21 on 31 May.
However, the report said the likely consequence of any upward revision in FY21 estimates is a concomitant decline in FY22 GDP estimates. “Though the impact of the second wave on the real economy was initially thought to be much limited in comparison with the first wave, our estimates now indicate that there might be nominal GDP loss of up to ₹6 lakh crore during Q1 FY22 as compared to loss of ₹11 lakh crore in Q1 FY21. Real GDP loss would be in the range of ₹4-4.5 lakh crore and hence real GDP growth would be in the range of 10% -15% (as against RBI forecast of 26.2%) during Q1FY21. However, we believe that in this wave our health crisis has overwhelmed us and hence the impact on GDP in the second wave will be more from health channel than the mobility channel. Sequential momentum of leading indicators is at all time low," it added.
SBI said though the corporate results so far also reinforce the fact that March quarter of FY21 growth would be much better than the December quarter growth, the entire projection for March quarter of FY21 is dependent on how much the past data will be revised by NSO. “Past experience on data revision indicates that apart from providing data for Q4 NSO also revises quarterly data for present/previous fiscal year and annual GDP estimate," it added.
Milestone Alert!Livemint tops charts as the fastest growing news website in the world 🌏 Click here to know more.