The gross domestic product (GDP) is expected to have grown 8.5 per cent in the financial year 2021-22 and 2.7 per cent in the March 2022 quarter, according to a report by SBI Research. It, however, added that the GDP projection for Q4 FY22 is clouded by significant uncertainties. The January-March quarter GDP numbers are due for release on May 31.
“We are projecting GDP growth for FY22 at 8.5 per cent and Q4 FY22 at 2.7 per cent. We, however, believe that the GDP projection for Q4 FY22 is clouded by significant uncertainties. For example, even a 1 per cent downward revision in Q1 GDP estimates of FY22 from 20.3 per cent, all other things remaining unchanged could push Q4 GDP growth to 3.8 per cent,” according to the report, titled ‘SBI Ecowrap’.
It added that given the strong growth in tax collections, the gap between GVA and GDP numbers in Q4 could push up the GDP number significantly, even as gross value added (GVA) might be much lower.
“Economic activity, which gained strength in Q2 FY22 with the ebbing of the second wave, has lost pace since Q3, exacerbated by the spread of the Omicron variant in Q4. The beneficial effects of the rapid ebb of infections have, however, been overwhelmed by the geopolitical conflagration since Feb’22. CPI inflation edged above the upper tolerance band as unfavourable base effects combine with the onset of supply shocks as conflict escalates,” it said.
India’s gross domestic product (GDP) grew 5.4 per cent in the December 2021 quarter, which was lower than 8.4 per cent growth in the previous quarter. However, it was much higher than 0.5 per cent growth that was seen in the corresponding period of the previous fiscal 2020-21. The GDP grew 1.6 per cent in the fourth quarter of FY21.
“As per our (SBI) ‘Nowcasting Model’, the forecasted GDP growth for Q4 FY22 would be 2.7 per cent, with a downward bias,” the report said.
It, however, added that the Indian economy’s recovery remains resilient, although risks stemming from global developments have thwarted the momentum. Inflation risks have become more accentuated in recent months. “The increase in international commodity prices also imparts net terms of trade shock that is widening the trade and current account deficits.”
On the corporate earnings, it said the early trend of Q4FY22 results reported better growth numbers across parameters as compared to Q4FY21 albeit contraction in operating margin due to higher input cost.
“Sectors such as steel, FMCG, chemicals, IT-software, auto ancillary and paper, among others, reported better growth numbers. However, sectors such as automobile, cement, capital goods– electrical equipment, edible oil, etc., though reported growth in topline (revenue) in Q4FY22, registered negative growth in PAT, as compared to Q4 FY22,” it said.
Meanwhile globally, while the average real GDP y-o-y growth in Q1 2022 for 25 economies at 5.5 per cent is a tad higher that the preceding quarter, GDP growth is marking an abrupt reversal in major economies (US, France, Italy, Sweden, etc.). The US economy unexpectedly contracted in the Q1 2022 (on a sequential basis) amid a resurgence in COVID-19 cases and drop in pandemic relief money from the government. This is the first decline in GDP since the short and sharp pandemic recession nearly two years ago, it said.
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