SBI economists peg Q4 GDP growth at 2.7%, FY22 expansion at 8.5%

Upcoming release of official data for economic performance is likely to register a 2.7 per cent growth for the January-March period, and the FY22 growth is expected to be 8.5 per cent, economists at State Bank of India (SBI) said on Thursday.

They were, however, quick to add that it is difficult to comprehend the numbers due to the spate of revisions that they have seen till now and termed this situation as a forecaster’s nightmare.

“We ...believe the GDP projection for Q4 FY22 is clouded by significant uncertainties. For example, even a one per cent downward revision in Q1 GDP estimates of FY22 from 20.3 per cent, all other things remaining unchanged, could push Q4 GDP growth to 3.8 per cent,” they noted.

Official data on the economy is expected to be released on May 31. The close coordination between the RBI and the government was welcomed by the economists by terming it as the best thing to have emerged during the pandemic.

The Central Statistics Office (CSO) had projected Q4 GDP at Rs 41.04 trillion and FY22 real GDP growth at Rs 147.7 trillion, an improvement of 1.7 per cent over pre-pandemic levels, they said, adding that the ‘SBI Nowcasting model’ with an unchanged quarterly numbers pegs the growth rate of Q4 GDP at Rs 40 trillion, that is lower by Rs 1 trillion than the CSO preliminary projections.

“We believe that downward adjustments in Q1, Q2 and Q3 numbers could have a soothing impact on Q4 GDP numbers. Every Rs 10,000 crore revision adds/subtracts 0.07 per cent from GDP growth,” the note said.

Early trends for the March quarter results from listed corporate houses reported better growth numbers across parameters, as compared to the year-ago period, with a contraction in operating margin due to higher input cost, it said.

Sectors such as steel, FMCG, chemicals, IT and auto ancillary reported better growth numbers while automobile, cement, capital goods, edible oil registered negative growth in profits despite a growth in top line, it noted.

Meanwhile, the economists said the oil prices are unlikely to stay elevated for long, and added they expect the Reserve Bank of India (RBI) to hike rates again at the June policy review.