SBI cuts GDP drop forecast to 7%

Pencilling in a G DP growth in third and fourth quarters, SBI Research on Wednesday revised its contraction f orecast f or the current fiscal year to 7%.

The agency had ear lier forecast a 7.4% contraction in 2020-21 GDP n umbers. In A pril-September, the economy contracted 15.7% but the second half ma y see a sur prise 2.8% growth, if the SBI analysis turns out to be correct.

Soumya Kanti Ghosh, group chief economic adviser at State Bank of India (SBI) said of the 41 high frequency leading indicators, 51% are showing acceleration which should help the economy turn around to the green from the third quarter with a 0.3 percentage point growth which is likely to surprise positively w hen the final numbers are out.

In April-June, the Indian economy contracted by a record 23.9%, but dramatically improved to -7.5% in the second quarter. In 201920, the economy had grown 4% and in the current fiscal year, it is on course to tank by 7%.

The consensus is -7.5-8% with the NSO pegging it at -7% and RBI at -7.5%.

"We now expect GDP decline for the full year to be around -7% compared to our earlier prediction of - 7.4%. Also, Q4 growth will also be in positive territory at around 2.5%," Ghosh said, adding promptly that the projections are condition alto the absence of any rise in infections.

"We retain our GDP forecast for FY 22 at 11%( RBI has pegged it at 10.5% and the economy survey at 11.5% and the budget did not offer a GDP estimate ), but with the cave at that 11% will be the floor below which it cannot fall," he said.

Corporate results so far also reinstate the fact that third quarter would be much better than the previous one.

The corporate GVA of 1,129 companies has expanded by 14.7% in October-December compared to 8.6% in second quarter (of 3,758 companies ex- telecom) On the fiscal gaps, it said 9.5% may be on the higher side.