Tuesday, 29 November 2022

GDP to grow of India in 18.5 % in the third quarter

In the June quarter, India's gross domestic product (GDP) is expecting to grow at 18.5 percent due to the low-cost base effect, SBI said in Ecowrap research reports. These projections, however, are lower than the 21.4 percent growth projected by the RBI.

The report said.

"SBI report based on Nowcasting models, the predicted GDP growth for Quater 1 of 2022 will be around 18.5 percent with going upward. The GVA is estimated to be at 15 per cent,"

The SBI Ecowrap report showed.

The Nowcasting model includes 41 high-frequency indicators associated with industry, service, and the world economy. Based on the model, SBI expects India's GDP growth to stay on the scale of 7.5 to 8 percent in the September quarter and 6 to 6.5 percent in the December quarter of the ongoing calendar year and the March quarter. The overall GDP growth is projecting to be within 9 to 9.5 percent, which is in line with Reserve Bank of India prediction,

SBI warned that a comprehensive division is possible between GVA and GDP because of substantial tax collection.

GDP to grow of India in 18.5 in the third quarter 1pixabay image

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The lender said that high GDP growth is mainly on account of the low base effect, which resulted in double-digit growth, or nearby double-digit growth, in real GDP in many countries. The average real growth GDP for 17 economies has improved from (–)0.1 percent in the March quarter to 12.2 percent in June.

The report said that corporate GVA, a sum of EBITDA and employee cost, is expected to clock substantial recovery during the first quarter of the current fiscal.

It added.

"Overall, the corporate GVA of 4069 companies registered a growth of 28.4 per cent in Q1 FY22. However, this is lower than growth in Q4FY22, thereby corroborating the lower GDP estimate than what was anticipated earlier,"

Corporate GVA in the March quarter of the current calendar year stood at 63.2 percent.

The report further said that the correlation between the year-on-year growth of the Consumer's Future Expectations Index and real GDP growth has sharply declined.

The correlation, which is highly positive till Q4 FY21 at 0.76, has gone down to 0.66 if RBI's Q1 GDP growth projection is including.

It said.

"This indicates that there is clear-cut divergence between that the consumers expect and what the RBI thinks. One of the reasons may be huge base effect which also impacts statistics but not the expectations,"

RBI's bi-monthly Consumer Confidence Survey tracks perceptions and expectations on the general economic situation, employment scenario, overall price situation, and own income and spending through responses of 5,384 households in 13 major cities.

The SBI Ecowrap further noted that lower mobility leads to lower GDP and higher mobility, but the asymmetric response.

It said.

"With decline in mobility the economic activity declines and thus GDP growth, however with increase in mobility the growth GDP does not increase in the same proportion. The relationship between the two has become poor as can be seen in Quater1 of FY 2022 when mobility has reduced, however GDP growth is highly and positively. But higher year-to-year growth is mainly on account of base effect,"

Meanwhile, the business activity index based on ultra-high frequency indicators shows a further increase in August this year, with the latest reading for the week ended August 16, 2021, at 103.3. The report said that RTO collection, electricity consumption, and mobility indicators have revived in Q2 FY22, indicating positive momentum in economic activity in the future.

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