SBI research dept cuts FY22 real GDP forecast to 10.4% from 11%

State Bank of India’ Economic Research Department has revised its real GDP growth forecast downwards to 10.4 per cent from 11 per cent in FY22 in view of the Covid-19 pandemic related partial/ local/ weekend lockdown in almost all the states.

The ERD estimated the total monetary impact (total loss) of the current lockdown in various States at Rs 1.5 lakh crores. Of this, Maharashtra, Madhya Pradesh and Rajasthan account for 80 per cent.

“Maharashtra has put up a stringent lockdown. Being the economically biggest and most industrialised state in India, this lockdown will have a huge impact on growth.

“Currently, we estimate loss of around Rs 82,000 crore for Maharashtra (which accounts for 54 per cent of the total loss) which will definitely increase if restrictions are further tightened,” Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI, said.

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Migration of labour

The ERD’s presentation titled ‘Thwarting the Second Wave: Rapid Vaccination should be the primary tool and not Lockdown,’ said migration of labour is continuing unabated.

According to data provided by Western Railways (Headquarters: Mumbai; for the period of April 1-12), almost 4.32 lakh people have returned to states such as Uttar Pradesh (UP), West Bengal (WB), Bihar, Assam and Odisha from Maharashtra.

“Of the 4.32 lakh, around 3.23 lakh reverse migrated to UP and Bihar alone. From Central Railways our estimate indicates that around 4.7 lakh reverse migrated to northern and eastern states from Maharashtra,” the presentation said.

SBI’s Business Activity Index is now at a five-month low (at 86.3 in the week ended April 19, 2021). All the indicators have shown a dip with maximum decline in Apple mobility, weekly food arrival at Mandis and RTO revenue collection, according to SBI’s ERD.

Referring to the April-May 2020 period witnessing huge monthly incremental increase in deposits (particularly time deposits) as people had fewer options to spend due to the nationwide lockdown, Ghosh observed that this time also large traction in time deposits can be expected as most of the states have imposed a partial lockdown.

All Scheduled Commercial Banks’ credit growth declined to a 59-year-low of 5.6 per cent in 2020-21, compared to 6.1 per cent growth in 2019-20, the presentation said. On the other hand, deposits have increased to 11.4 per cent in FY21, compared to 7.9 per cent growth in FY20.

Peak time

The ERD’s model suggests that the estimated peak time is 96 days from February 15, indicating the peak happening in the third week of May.

“It may be noted that we are incrementally adding around 15,000 cases over the peak of the previous day as of today, though such numbers are difficult to predict.

“Uttar Pradesh and Maharashtra achieved a peak before the national peak in the first wave. Now new cases in Maharashtra seem to be stabilising but the share of cases in total of various other states (Chhattisgarh, Madhya Pradesh, Gujarat) has increased in the current second wave and these are showing an increase in daily new cases,” Ghosh said.

So, if other states also implement strict actions and control the spread, then the national peak may come within the weeks after the Maharashtra peak, he added.

Vaccine update

The presentation said: “Spanish Flu in 1918 shows more deaths in later waves, thus vaccination is a must to avoid larger fatalities later.

“Injection to infection ratio shows that India made rapid improvement this year, but it is still below Israel, Chile and UK...Only 2.6 per cent of the population in the world is fully vaccinated, and in India only 1.2 per cent of population is fully vaccinated till now.”

The experience of other countries shows infections stabilise after 15 per cent of the population receives a second dose, it added.

Now that States are free to buy vaccines from manufacturers from May 1, ERD’s estimate for 13 States shows that the cost of vaccines at almost 15-20 per cent of States’ health expenditure budget (assuming half of the population in these states will get vaccinated by the Central Government), still it will be only 0.1 per cent of GDP.

This is significantly lower than the economic loss in GDP due to lockdown, which is already at 0.7 per cent of GDP, it added.

Vaccine Hesitancy Index

The ERD observed that the state-wise performance in case of vaccination is quite uneven.

“Our ‘Vaccine Hesitancy Index’ calculated as doses administered per 100 available shows that all N-E states and in states like Goa, Jharkhand, Assam, Delhi, Uttarakhand, Chhattisgarh there is a vaccine hesitancy,” Ghosh said.

Give ambulance status to oxygen tankers

The ERD said all states should allow ambulance status to oxygen tankers so that they move faster, which will certainly help and reduce the transit time.

“Government of India should analyse the oxygen data on a daily basis and direct supply. This is purely a supply chain optimisation problem,” Ghosh said.

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