Economy to Contract by 7%, says SBI Research

SBI Research has revised its projection. Now it says the contraction forecast for the current fiscal year in GDP growth is expected to be 7%. The agency had earlier forecast a 7.4% contraction in 2020-21 GDP numbers. In April-September, the economy contracted 15.7 percent. Now if the SBI analysis turns out to be correct then the second half may see a surprise 2.8 percent growth. In April-June, the Indian economy contracted by a record 23.9 percent, but dramatically improved to -7.5 % in the second quarter. In 2019-20, the economy had grown 4 percent and in the current fiscal year, it is on course to tank by 7%. The consensus is -7.5-8% with the NSO pegging it at -7 % whereas RBI at -7.5 %.

SBI chief economic adviser Soumya Kanti Ghosh said of the 41 high frequency leading indicators, 51 percent are showing acceleration which should help the economy turn around to the green from the third quarter with a 0.3 percentage point growth which is likely to surprise positively when the final numbers are out. We now expect GDP decline for the full year to be around -7 percent compared to our earlier prediction of 7.4 %. Also, Q4 growth will also be in positive territory at around 2.5 percent.

Ghosh said that we retain our GDP forecast for FY22 at 11 percent but with the caveat that 11 percent will be the floor below which it cannot fall. RBI has pegged it at 10.5% and the economy survey at 11.5 percent and the budget did not offer a GDP estimate. Corporate results so far also reinstate the fact that third-quarter would be much better than the previous one.