The statistical benefits of the steep downward revision in FY2019 growth to 6.1 per cent from 6.8 per cent could push up FY2020 GDP growth to 4.7 per cent from 4.6 per cent, says ‘Ecowrap’, State Bank of India’s economic research report. However, the report cautioned that the impact of coronavirus on India could happen with a lag.

“...We were earlier anticipating a downward revision in FY2020 growth rate from 5 per cent to 4.6 per cent, but now the statistical benefits of a downward revision in FY2019 GDP growth could push up FY2020 GDP growth 4.7 per cent. We anticipate upward revisions in Q1 (April-June) and Q2 (July-September) FY2020 GDP,” said the report.

In India, GDP data are revised six times and there are instances wherein quarterly GDP figures have been changed more than four times.

“The new GDP series, we believe, is still settling down with the economy going through structural changes and is prone to significant volatilities. For example, in FY2017, the Q1 GDP figure was revised upwards in every revision from 7.1 per cent and it finally settled at 9.4 per cent; this may be even revised further as the final quarterly data is pending,” said Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI.

The report, interestingly, said that the steep revision of FY2019 GDP growth to 6.1 per cent indicated that the slowdown was much more entrenched and had started from April 2017 onwards after the GDP growth reached a peak of 8.3 per cent in FY2017. It only worsened in FY2019 (post the IL&FS crisis), and in FY2020, it has reached its nadir, with growth projected at 5 per cent (with a downward bias) by the Central Statistical Organisation.

Impact of coronavirus

“We are, however, worried that the impact of coronavirus on India could now happen with a lag. The outbreak is now expected to cause a growth erosion of 100 basis points in China alone. New hotspots have emerged in South Korea (977 cases) and in Italy (229 cases), and these will result in more quarantines, border closures and disruptions in economic relations. Thus, though the cost of death might be limited, the economic impact could be significantly large,” the report said.

Although the number of Covid-19 cases in India are less, the report said the economic impact is expected to get bigger from supply chain risk, which may link up with exports as in pharmaceutical sector.

The report pointed out that more crucially, the April-December 2019 data on India’s imports show that there are 19 HS (harmonised system for classification of products) categories in which China has more than half the share; these are mostly consumer goods.

With China in the grip of coronavirus, immediately finding other sources for imports is going to be difficult. This can impact local traders, and in turn, consumers adversely, the report said.

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