HDFC Bank projects FY22 GDP growth at 9.4%

MUMBAI: Official data print on the GDP will show a 7.8% expansion on a year-on-year basis for the September 2021 quarter, according to a report.

Real GDP will grow 9.4% in FY22 and decelerate to 7.5% for FY23 as the base effects result in the higher growth in the ongoing fiscal wear-off, according to the report by economists at HDFC Bank released on Wednesday.

In FY21, the GDP had contracted 7.3% due to the pandemic. For FY22, the RBI expects GDP to clock a growth of 9.5%, which will slow to 7.8% in FY23. The GDP had expanded by over 20% for the first quarter on lower base. The official data for the second quarter is set to be released on November 30.

The report by HDFC Bank said some part of the expected 7.8% GDP growth in the second quarter will be due to a low base from a year when the economy contracted by 7.4% but there is likely to be a sequential improvement in GDP growth in Q2FY22. On a sequential basis, GDP is expected to grow 9.75% in Q2 from a contraction of 16.9% in the second wave-hit previous quarter, reflecting a revival in economic activity.

“With support from pent-up demand and easing of mobility restrictions in the country, economic activity (as captured by a number of high frequency indicators) moved above pre-second wave levels in early August and has remained robust since then,” the report said.

Agriculture, forestry and fishing growth will come at four per cent in Q2FY22, industry will be at 6.3% and services at 8.6%, it added.

When looked at from a gross value added (GVA) basis, the September 2021 quarter growth will come at 7.3%, the bank estimated, explaining that the gap between GDP and GVA is likely to be driven by higher tax revenue collection and lower subsidy pay-outs in this quarter.

Foreign brokerage firm Goldman Sachs said that Indian GDP will grow at 8.5% in 2021-22, and the rate will accelerate further to 9.8% in 2022-23. “We expect consumption to be an important contributor to growth in 2022, as the economy fully re-opens driven by a notable improvement in virus situation and adequate progress on vaccination,” it said in a report.

The firm expects government capital spending to continue, nascent signs of a private corporate capex recovery, and a revival in housing investment.