The State Bank of India said in its research paper that the FY22 real GDP estimates were higher by Rs 18,000 crore than the Budget 2022 estimates. SBI Ecowrap added that trade, hotels, transport, communication and broadcasting services are the only sectors that are not out of the woods. It added that Q3 absolute numbers of these sectors are still 95 per cent lower than the pre-pandemic level or Q3 FY20.
The paper comes after the government’s statistics office announced on Monday that GDP grew at 5.4 per cent in the October-December quarter, mostly due to lacklustre manufacturing output and investment. "GDP at Constant (2011-12) Prices in Q3 of 2021-22 is estimated at Rs 38.22 lakh crore, as against Rs 36.26 lakh crore in Q3 of 2020-21, showing a growth of 5.4 percent," the data stated.
The SBI Ecowrap further added: “For the full fiscal, GDP growth is expected to increase by 8.9 per cent (SBI: 8.8 per cent) and GVA growth by 8.3 per cent as growth seems to have somewhat lost its momentum. At 8.9 per cent, Q4 GDP growth is printing at 4.8 per cent. Given the impact (though not so serious) of Omicron variant and Russia-Ukraine crisis in Q4, we believe that Q4 GDP growth would be lower than 4.8 per cent pushing down GDP FY22 real GDP growth below 8.9 per cent with downward bias around lower end of spectrum of consensus estimates hovering around 8-10 per cent.”
It added that since FY22 nominal GDP is now at Rs 2.36 lakh crore as compared to the first estimates of Rs 2.32 lakh crore based on which deficit numbers in Budget 2022 were given, fiscal deficit will be now 6.7 per cent as opposed to 6.9 per cent in the Budget. “For FY23 nominal GDP growth comes to 9.1 per cent from 11.1 per cent (given in the budget). Assuming the same growth rate of 11.1 per cent on the new GDP numbers for FY22, fiscal deficit for FY23 will also come down to 6.3 per cent of GDP from the budgeted 6.4 per cent of GDP. Clearly, higher nominal GDP is eating away Government debt, though the dangers of higher inflation are many,” it added.
Signs of recovery in H1 2021-22 became visible with credit growth seeing an increase of 5.4 per cent, compared to the previous year’s 3.2 per cent. Services sector credit growth continued to decelerate, although credit to industry showed signs of improvement. All scheduled commercial banks’ deposits growth continued to lag and grew by 9.1 per cent in the fortnight ended February 11, compared to last year’s 11.8 per cent, Ecowrap stated.
“Private consumption is below the pre-pandemic level and this is largely because labour intensive sector trading and construction have not recovered from the pandemic shock. The recovery in these sectors remains patchy,” the report added.
“Core GVA has slowed down to 3 per cent in Q3 from 7.3 per cent in Q2. Core GVA and PFCE ideally follow the same trend. It thus remains to be seen how PFCE picks up in FY23, as it will provide the fulcrum of an impending and nascent recovery. As of now, we are not revising our forecast for FY23 at 8 percent, though any further event outlier and/or prolonging of the Ukraine-Russia conflict could act as a clear downside to our growth forecast,” it said.
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