India Q4 GDP preview: Economy may have improved; FY22 GDP estimates trimmed

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May 31, 2021 11:26 AM

India’s economic growth is likely to have continued expanding in the fiscal fourth quarter of the last year 2020-21, with economists predicting a 1.3-3.5% on-year GDP growth in January-March.

india GDP growth india GDPThe report expects gross value added (GVA) to be at 15 per cent in Q1FY22.

India Q4 FY21 GDP data today: India’s economic growth is likely to have continued expanding in the fiscal fourth quarter of the last year 2020-21, with economists predicting a 1.3-3.5% on-year GDP growth in January-March. However, economists continue to expect a contraction for the full financial year 2020-21, owing to the severe lockdown seen in the initial quarters. The Central Statistics Office (CSO) will later today reveal how the Indian economy performed during the January-March quarter and the pandemic-struck full financial year. India’s GDP grew 0.4% in the October-December quarter of FY 2020-21.

January-March quarter GDP growth expectations

Barclay’s Chief India Economist Rahul Bajoria: 3.5%

Rahul Bajoria believes that the resurgent COVID-19 wave took the wind out of an economic recovery that was gathering momentum. “We expect the economy to have expanded by 3.5% on-year in Q4 FY21, as a low base and strong sequential gains helped propel GDP growth to a five-quarter high,” he said. Rahul Bajoria added that the agriculture sector is likely to have remained resilient, as large wholesale market arrivals and high purchases of harvested crops by the government point to a strong rabi harvesting season.

ICRA’s Chief Economist Aditi Nayar: 2%

“With a widespread recovery in volumes benefitting from the low base of the onset of the nationwide lockdown in March 2020, we project the growth of the GVA at basic prices to have improved to 3.0% in Q4 FY2021,” said Aditi Nayar. ICRA expects the improvement in the on-year growth of GVA at basic prices in Q4 to have been led by the industry and services, with a deterioration foreseen in the performance of agriculture, forestry and fishing.

Morgan Stanley economist Upasana Chachra: 2.5%

“We expect GDP growth to recover to 2.5% on-year in QE March, amid broad-based improvement across components. High-frequency indicators such as PMI, rail freight, power demand, GST collections and E-Way Bills all improved amid a better COVID-19 situation in the quarter,” Morgan Stanley said in a note last week. Morgan Stanley estimates a broad-based improvement in the services sector, while industry growth is expected to reflect a slight sequential slowdown.

State Bank of India’s Chief Economic Advisor Soumya Kanti Ghosh: 1.3%

Soumya Kanti Ghosh said that corporate results have reinforced the fact that Q4 growth would be much better than Q3 growth. “The corporate GVA of 625 companies has expanded by 62.04% in Q4 as compared to 12.98% growth in Q3 (of 4164 companies ),” he highlighted.

Full-year contraction to be in single digits

Based on the fourth-quarter growth estimates, SBI has pegged the full-year GDP contraction to be 7.3%, down from the earlier predicted 7.4%. In the Financial Year 2019-2020, GDP growth came in at 4.2%. SBI’s estimates are modest than those pegged by the NSO and the Reserve Bank of India. While NSO believes full-year contraction to be 8%, the RBI estimated it to be 7.5%.

Grim picture ahead in FY22?

The ferocious second wave is likely to have an impact on India’s GDP growth going forward in Financial Year 2021-2022. “Though the impact of the second wave on the real economy seems to be limited so far on paper,” SBI said. “Real GDP loss would be in the range of Rs 4-4.5 lakh crore and hence real GDP growth would be in the range of 10% -15% (as against RBI forecast of 26.2%),” they added.

Barclay’s has also trimmed its forecast for this fiscal year. “We reduce our baseline FY2021-22 GDP growth forecast again, lowering it to 9.2% on-year from 10% earlier, and 11% before the outbreak of the second wave,” they said.

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