SBI upgrades growth hopes to 9.3%-9.6% for 2021-22

The State Bank of India (SBI) has upgraded its GDP growth projections for this year to a range of 9.3% to 9.6%, from 8.5% to 9% forecast earlier, attributing the optimism to improved vaccination and lower incidence of COVID-19 cases in the country.

Citing 41 high-frequency indicators factored into its ‘Nowcasting’ model, SBI economists have forecast a GDP growth 8.1% with an upward bias for the July to September quarter. Official growth estimates for the second quarter are expected at the end of the month.

India’s GDP had grown 20.1% in the April to June quarter, compared to a 24.4% contraction in the same quarter of 2020. The second quarter of 2020-21 had recorded 7.9% negative growth.

SBI’s second quarter growth hopes are higher than the 7.9% projected by the Reserve Bank of India (RBI). The central bank has estimated that the economy would grow 9.5% in 2021-22.

“The full year GDP growth is now revised upwards to 9.3%-9.6% from our earlier estimate of 8.5-9.0%. With this the real GDP will be around ₹2.4 lakh crore more than the 2019-20 Real GDP of ₹145.69 lakh crore,” SBI group chief economic advisor Soumya Kanti Ghosh said, stressing that this will take the economy 1.5% to 1.7% above pre-pandemic levels by March 2022.

“The reason for the revision is that India remained unscathed in the July to September from the global situation, which is marred by supply disruptions, stubborn inflation and surges of infections. India recorded only 11% increase in cases during this quarter which is the second lowest among top 15 most affected countries,” he said in the research report.

“India’s projected 8.1% growth rate in Q2 is the highest growth across all economies. The average GDP growth of 28 selected economies has decelerated to 4.5% in the same quarter as against 12.1% [in the previous quarter],” Mr. Ghosh pointed out.

The total COVID-19 active cases have reached the lowest mark of 1.24 lakh since June 2020, and vaccination has helped economic activity reach pre-Covid levels, the report said. “With a large population already vaccinated we believe that momentum of economic growth is likely to remain on the upside,” it concluded.

Last week, rating agency ICRA had raised its GDP growth projection for the July to September quarter to 7.9% from 7.7%, attributing the revision largely to a surge in Central and State Governments’ spending in September.

“Economic activity was supported in the second quarter by a pick-up in industrial and service sector volumes after the second wave of COVID-19 subsided and rising vaccine coverage revived confidence. Additionally, healthy Central and state Government spending, robust merchandise exports and continuing demand from the farm sector supported economic activity in that quarter,” ICRA chief economist Aditi Nayar had noted.

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