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India’s real GDP growth would be in the range of 10-15 per cent as against the Reserve Bank of India’s forecast of 26.2 per cent for Q1 (April-June) FY22, according to a State Bank of India (SBI) report.
SBI’s economic research department (ERD) has estimated real GDP loss in the range of ₹4-4.5 lakh crore. The impact of the second wave will be more from health channel than the mobility channel, the report said.
“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,” as per the ERD’s “Ecowrap” report.
ICRA pegs Q4 GDP growth 2%; FY21 contraction at 7.30%
The impact of the second wave on the real economy was initially thought to be much limited due to the localised nature of lockdowns (which have, however, now turned into a de facto national lockdown), better adaptation of people to work from home protocols and increased use of digital payments, the report said.
“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,” said Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI.
Barclays cuts India’s FY22 GDP estimate to 9.2%
Revision in FY21 GDP
The report said it is likely that the previously published CSO GDP growth for FY21 at –8 per cent might see an upward revision once the numbers are released on May 31, 2021. Based on quarterly GDP numbers in FY21 and full year FY21 GDP estimates, Q4 (January-March) GDP was projected to reveal a contraction of 1.1 per cent.
Based on SBI Nowcasting model the GDP growth forecast for Q4 would be around 1.3 per cent (with downward bias).
“We now expect GDP decline for the full year to be around -7.3 per cent (our earlier prediction: -7.4 per cent). One likely consequence of any upward revision in FY21 estimates is a concomitant decline in FY22 GDP estimates,” Ghosh said.
The report observed that had the country’s growth rate crossed 1.7 per cent in Q4FY21, India would have been the second fastest country after China in terms of GDP growth, and going by ERD’s estimate of 1.3 per cent GDP growth India would still be the 5th fastest growing country amongst 25 countries (that have released their GDP numbers so far).
Deposits
The report said an interesting point to note is that deposits have shown alternate periods of expansion and contraction in FY22 in the first three fortnights.
Ghosh opined that it is possible that such expansion followed by contraction could indicate household stress as people getting salary credits in the first fortnight are withdrawing it in the second fortnight for health expenses/stocking up currency for precautionary motive amidst an uncertain scenario.
“So far, we have got only three fortnights of deposit data and this trend will be validated once we have the complete data in the first week of June,” Ghosh said.
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