SBI’s Ecowrap report projects a 5.8% GDP growth in Q3 of FY22

SBI’s Ecowrap report forecasts that the GDP growth of India in the third quarter of fiscal year 2022, stands at 5.8%. Also, the GDP growth for the whole year of 2022 is revised from 9.3% to 8.8% with a downward bias. While, the National Statistical Office (NSO) is yet to declare the GDP growth for the concerned period of the fiscal year. It will do so on 28th February 2022.

So far, India’s economy expanded by 8.4% in the Q2 of FY22. Although, it has outperformed pre-pandemic levels but underperformed on YOY basis. As the expansion during the same period, July-September 2021, last year was at 20.1%.

What are the factors affecting growth in FY22 as per SBI’s Ecowrap?

SBI uses a model called SBI Nowcasting model which includes 41 high-frequency indicators to determine industrial activities, service activities, and global outlook towards growth.

1. The recovery in economic activity is yet to reach private sectors. It remains below pre-pandemic levels.
2. The demands associated with contact intensive sectors such as hospitality are witnessing reduced demands.
3. Further, rural demand indicators demonstrate that the demand of two-wheelers and tractors has declined since August 2021.
4. Also, urban demand indicators suggest that consumer durables, passenger vehicle sales, domestic air travelling has declined too amidst Omicron variant threats.

However, investment activities managed to remain afloat. Exports in India are performing well.

What are the measures that SBI’s Economic Research Department expects?

The report finds government’s accommodative stance of not withdrawing liquidity from the market as apposite.

• It expects an alleviation in government securities (G-sec) yields at 6.6% from the current 6.7%.
• The government may offer livelihood loans of up to ₹50,000 to rural poor people. Even on interest subsidy at 3% on a portfolio of ₹50,000 crore, the expenditure shall be ₹1,500. It will boost consumption.