India’s GDP growth likely at 5.8% in Q2FY23, says SBI Ecowrap

India’s GDP growth likely stood at 5.8 per cent in Q2FY23, down from 13.5 per cent in Q1FY23, stated SBI Ecowrap. The research report stated that while the consensus estimates are 6.1 per cent, the decision makers use a process of projecting the present state of the economy through quarterly growth due to the lag of two months in GDP data. This process is called nowcasting. 

GDP growth at less than 6 per cent could imply India is likely to have expanded at less than the benchmark 7 per cent, according to the latest State Bank of India (SBI) Ecowrap report. 

The Ecowrap underlined, “Overall, a sub 6% growth if it materialises in Q2, could imply that India is likely to have expanded at lower than the 7% benchmark. We however believe there is somehow a large disconnect between leading indicators and GDP growth since the onset of the pandemic. Growth impulses continue to be strong and it may be better to look through the GDP headline numbers for a couple of quarters before arriving at a definitive conclusion about the growth trajectory.”

The percentage of indicators showing accelerated growth stood at 76 per cent in Q2FY23 whereas GDP growth stood at 5.8 per cent for the same period. It further mentioned that India has faced challenges such as high volatility in forex markets and elevated and persistent inflation due to external challenges and how policymakers tackle these challenges needs to be watched. 

The Ecowrap also noted, “Several indicators suggest that the Indian economy is making resilient progress in Q2FY23 in spite of the drag from global spillovers, elevated inflation and some slackening of external demand as geopolitical developments take their toll on world trade.”

It said that, however, the SBI Composite Leading Index (CLI), which is a basket of 41 leading indicators from almost all the sectors, based on monthly data shows declining economic activity after June 2022 to September 2022. October shows signs of turning points with increased economic activity, which is making the FY23 Q3 GDP growth more optimistic.  

Going ahead, the report also cited global growth projections from the International Monetary Fund’s (IMF) World Economic Outlook from October 2022. The IMF stated global growth is likely to lower from 6 per cent in 2021 to 3.2 per cent in 2022 and 2.7 per cent in 2023 given the economic slowdown, high inflation, higher cost of living, Russia-Ukraine crisis, and COVID-19 pandemic.

The IMF also projected global inflation to go up from 4.7 per cent in 2021 to 8.8 per cent in 2022 but will drop to 6.5 per cent in 2023 and 4.1 per cent by 2024. 

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