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GDP likely to grow at 18.5% in Q1: SBI report

Source: PTI
August 24, 2021 13:27 IST
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The country's gross domestic product (GDP) is expected to grow at around 18.5 per cent with an upward bias in the first quarter of the current financial year, according to SBI research report Ecowrap.

GDP

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This estimate is lower than the Reserve Bank of India's GDP growth projection of 21.4 per cent for the April-June quarter.

“Based on our 'Nowcasting' model, the forecasted GDP growth for Q1 FY22 would be around 18.5 per cent (with upward bias),” the report said.

 

Higher growth in Q1 FY22 is mainly on account of a low base.

State Bank of India has developed the 'Nowcasting Model' with 41 high-frequency indicators associated with industrial activity, service activity, and the global economy.

The report expects gross value added (GVA) to be at 15 per cent in Q1FY22.

The corporate results announced so far indicate that there is a substantial recovery in corporate GVA EBIDTA (earnings before interest, taxes, depreciation, and amortisation) + employee cost) in Q1 FY22, it said.

The report said the corporate GVA of 4,069 companies registered a growth of 28.4 per cent in Q1 FY22.

However, this is lower than growth in Q4 FY21, thereby corroborating the lower GDP estimate than what was thought earlier, it said.

The report further said it is globally noted that lower mobility leads to lower GDP and higher mobility to higher GDP, but the response is asymmetric.

With the decline in mobility, the economic activity declines and thus GDP growth, however, with an increase in mobility the GDP growth does not increase in the same proportion, it said.

“The relationship between the two has become weaker as can be seen in Q1 FY22 when mobility has declined, however, GDP growth is high and positive.

"But higher y-o-y growth is mainly on account of the base effect,” the report said.

Meanwhile, the business activity index based on ultrahigh-frequency indicators show a further increase in August 2021, with the latest reading for the week ended August 16, 2021, at 103.3, it added.

RTO (regional transport office) collection, electricity consumption along with mobility indicators have revived in Q2 FY22, indicating positive momentum in economic activity going forward, the report said.

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