Home >News >India >SBI Research revises forecast for contraction in FY21 to 7%

Pencilling in a gross domestic product (GDP) growth in the third and fourth quarters, State Bank of India (SBI) Research on Wednesday revised its contraction forecast for the current fiscal year to 7%.

The agency had earlier forecast a 7.4% contraction in 2020-21 GDP numbers. In April-September, the economy contracted 15.7% but the second half may see a surprise 2.8% growth, if the SBI analysis turns out to be correct.

Soumya Kanti Ghosh, group chief economic adviser at SBI said of the 41 high frequency leading indicators, 51% are showing acceleration, which should help the economy turn around to the green from the third quarter with a 0.3 percentage point growth, which is likely to surprise positively when the final numbers are out.

In April-June 2020, the Indian economy contracted by a record 23.9%, but dramatically improved to -7.5% in the second quarter. In 2019-20, the economy had grown 4% and in the current fiscal year, it is on course to tank by 7%.

The consensus is -7.5-8% with the NSO pegging it at -7% and RBI at -7.5%.

“We now expect GDP decline for the full year to be around -7% compared with our earlier prediction of –7.4%. Also, Q4 growth will also be in positive territory at around 2.5%," Ghosh said, adding promptly that the projections are conditional to the absence of any rise in infections.

“We retain our GDP forecast for FY22 at 11% (RBI has pegged it at 10.5% and the economic survey at 11.5% and the budget did not offer a GDP estimate), but with the caveat that 11% will be the floor below which it cannot fall," he said.

Corporate results so far also reinstate the fact that third quarter would be much better than the previous one. The corporate gross value added (GVA) of 1,129 companies has expanded by 14.7% in October-December compared with 8.6% in the second quarter . On the fiscal gaps, it said 9.5% may be on the higher side.

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