State Bank of India’s economic research team expects GDP numbers for FY22 to be revised upwards to around 9.5 per cent as going forward, it believes even if rising infections impact mobility, the economic activity is not expected to get affected much.
The first advance estimate of GDP growth by the National Statistical Office (NSO) has pegged India’s FY22 GDP growth at9.2 per cent.
“We believe that NSO’s estimate is on the conservative side, as the calculated GDP growth for H2 FY22 for construction comes at –0.9 per cent and for financing, insurance, real estate & business services is at a mere 2 per cent for H2 FY22.
“We still believe that real GDP will grow at around 9.5 per cent in FY22,”said Soumya Kanti Ghosh, Group ChiefEconomic Adviser, in SBI’s economic research report “Ecowrap”.
Ecowrap noted that Covid-19 cases have been rising significantly in India as well as across the globe. However, studies so far reveal that the current Omicron variant is less severe than the Delta variant.
Data also substantiates this fact. The report said while number of new cases increased from 1.3 crore in October 2021 to almost double to 2.5 crore in December 2021, the number of deaths remained constant (just about 2200 more deaths occurred in December as compared to October).
“...Even SBI business activity index is at its all-time high of 114.6 for the week ended January 3, 2022, indicating that economic activity is not getting affected by the sudden bout of infections. The index has been above the pre-Covid level since mid-July 2021 barring some minor exceptions,”Ghosh said.
Nominal GDP growth
Emphasising that nominal GDP growth is a whopping 17.6 per cent in FY22, Ghosh observed that this is the second highest nominal growth achieved, with 19.9 per cent nominal growth registered in 2010-11 and 17.1 per cent growth in 2006-07. The data indicates that the overall GDP growth is 1 per cent above of the pre-pandemic level (FY20).
The report said almost all sectors except ‘trade, hotels, transport, communication & services related to broadcasting’ (which are still 8 per cent below the pre-pandemic level) reached the pre-pandemic level (on constant prices).
On the expenditure side, the report assessed that the private final consumption expenditure is still 3 per cent below the pre-pandemic level.
“Taking into account the revised GDP figures of today, even if we consider the additional spending announced by the Government in early December 2021, fiscal deficit of the Government still comes at Rs 15.88 lakh crore or 6.8 per cent of the GDP.
“For FY23, the fiscal consolidation should remain limited to 30-40 basis points from the current fiscal,” Ghosh said.