GDP to Register Growth of Around 8.5% Says SBI

Uncertainties plague Q4FY22 GDP numbers as customary quarterly data revisions are quite difficult to comprehend, but will it hit the threshold of 3 to 3.5 per cent, the report released by SBI's Economic Research Department said.

The government is scheduled to release Q4 FY22 GDP numbers on 31 May. SBI noted in the report that it is difficult to comprehend the numbers as a spate of customary quarterly revisions in FY22 on May 31st could make it a forecaster's nightmare.

Nevertheless, we believe FY22 GDP numbers could move now closer to 8.5 per cent as Q4 GDP numbers as per SBI nowcasting Model, SBI's Group Chief Economic Adviser Soumya Kanti Ghosh said in the report.

The other big puzzle could be the gap between GVA and GDP numbers in Q4 given the strong growth in tax collections. This could push up the GDP number significantly, even as GVA might be much lower, the report said.

We are projecting GDP growth for FY22 at 8.5 per cent and Q4 FY22 at 2.7 per cent. We however 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, Ghosh noted in the report.

The report noted that the Central Statistics Office had projected Q4 GDP at Rs 41.04 lakh crore and FY22 real GDP growth at Rs 147.7 lakh crore, an improvement of 1.7 per cent over pre-pandemic levels.

SBI Nowcasting model with an unchanged quarterly numbers pegs the growth rate of Q4 GDP at Rs 40 lakh crore, which is lower by Rs 1 lakh crore from 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 7 basis points from GDP growth, the report said.

Beyond the numbers, the early trend of Q4FY22 results from Corporate, in the listed space, reported better growth numbers across parameters as compared to Q4 FY21 albeit contraction in operating margin due to higher input cost.

Sectors such as Steel, FMCG, Chemicals, IT-Software, Auto Ancillary, Paper, etc. reported better growth numbers. However, sectors such as Automobile, Cement, Capital Goods - Electrical Equipment, Edible Oil, etc. though reported growth in top line in Q4FY22, registered negative growth in PAT, as compared to Q4 FY22.