FY21 GDP Estimates At -8% May See Upward Revision: SBI Research

It is likely that the previously published CSO GDP growth for FY21 at -8% might see an upward revision once the numbers are released on 31 May'21, SBI Research has said in a report. Based on quarterly GDP numbers in FY21 and full year FY21 GDP estimates, Q4GDP was projected to reveal a contraction of 1.1%. Based on SBI Now casting model the forecasted GDP growth for Q4 would be around 1.3% (with downward bias).

"We now expect GDP decline for the full year to be around -7.3% (our earlier prediction: -7.4%). One likely consequence of any upward revision in FY21 estimates is a concomitant decline in FY22 GDP estimates. Even as we ponder over FY22 GDP estimates, COVID-19 infection is still spreading in rural areas.

The share of rural districts in new cases is rising quite rapidly during May, even though overall cases have started to decline from the second week of May. It has increased from 45.5% in end-Apr'21 to 53.6% as per the latest data. Notably, this is same as the peak of 53.7% observed during end-Aug'20. Top 20 rural districts now account for around 15% of country-wise new cases with hinterlands of Andhra Pradesh, Maharashtra and Karnataka continuing to be the worst affected as per the reported data," the SBI Research report has said.

According to the report, though the impact of the second wave on the real economy was initially thought to be much limited (due to localised nature of lockdowns which have, however, now turned into a de facto national lockdown, better adaptation of people to work from home protocols, increased use of digital payments) in comparison with the first wave.

"Our estimates now indicate that there might be nominal GDP loss of up to Rs 6 lakh crore during Q1 FY22 as compared to loss of Rs 11 lakh crore in Q1 FY21. 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%) during Q1FY21. However, we believe that in this wave our health crisis has overwhelmed us and hence the impact on GDP in the second wave will be more from health channel than the mobility channel. Sequential momentum of leading indicators is at all time low," the report has stated.