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GDP numbers a positive surprise, says SBI report


NEW DELHI: The gross domestic product (GDP) numbers released by the Centre on Tuesday do not disappoint much, instead it inspires the market, economists at the State Bank of India (SBI) said in a report.
India’s economy expanded by 8.7 per cent in financial year 2021-22 as against 8.9 per cent projected by the second advanced estimates released by the government in February.

There was also minimal revision in GDP data for the first, second and third quarter.
“The sequential seasonally adjusted GDP growth is lower than the non-seasonally adjusted GDP growth for Q4 over the past,” the report said.
In FY22 Q4, real GDP growth is 6.7 per cent quarter-on-quarter (q-o-q), however the seasonally adjusted real GDP growth is only 0.71 per cent, showing only a modest improvement over the past quarter and loss of growth momentum, it added.

Gap between nominal, real GDP rises
The report further said that the gap between nominal GDP growth and the real GDP growth increased between Q2 FY20 and Q1 FY22 owing to higher inflation.
It moderated in Q2 and Q3 FY22 but increased modestly in the last quarter of FY22.
The growth in deflator has increased modestly to 10.4 per cent yoy in Q4 FY22 compared to 9.8 per cent in the previous two quarters.
For FY22, growth in GDP deflator increased to 10 per cent from 5.6 per cent in FY21, with industry witnessing highest growth in GDP deflator (14 per cent yoy compared to 1.7 per cent yoy).

‘Trade, hotels still not out of woods’
Analysing performance of different sectors, the report said that trade, hotels, transport, communication and services is the only sector that is still not out of the woods.
The absolute numbers of thsi sector are still 10.3 per cent or Rs 3.04 lakh crore lower than pre-pandemic level, the report noted.
“We believe that by Q1 FY23 this sector will reach/cross the pre-pandemic level,” the SBI report said.

During Q4, apart from manufacturing all other sectors showed positive growth. Manufacturing declined by 0.2 per cent indicating the slight impact of Omicron variant induced lockdowns. Construction also showed tepid growth of 2 per cent.
Further, agriculture grew by 3 per cent, manufacturing and construction by 11.5 per cent and 9 per cent, respectively.
GDP surpasses pre-pandemic level
India’s GDP — which suffered a loss of Rs 9.57 lakh crore in FY21 as compared to FY20 — increased by Rs 11.77 lakh crore during FY22, the report said.
It noted that GDP surpassed by Rs 2.19 lakh crore in FY22, compared to the FY20 level and Rs 7.4 lakh crore compared to FY19 level.
“If the GDP for FY22 is compared to that of FY20 – before the pandemic hit the economy – it is higher by 1.5 per cent,” SBI economists said.
On expenditure side, both the private and government final consumption expenditure crossed the pre-pandemic level by Rs 1.2 lakh crore and Rs 0.93 lakh crore, respectively.
While private final consumption expenditure grew by 7.9 per cent in FY22 as compared to contraction in FY21, the government final consumption expenditure decelerated to 2.6 per cent in FY22 as against 3.6 per cent growth in FY21.
Global outlook
Economists at SBI believe that global economic outlook is marred with downside risks due to the ongoing geopolitical crisis and its impact on trade, output and prices.
They said that the sharp rise in most commodity prices and significant tightening of financial conditions due to front loaded monetary policy actions and high inflation are posing financial stability concerns.
The World Economic Outlook (WEO) cut its global growth forecast for 2022 relative to its January 2022 projection by 0.8 percentage points to 3.6 per cent. China’s economy remained deep in a slump in May as lockdowns continued to weigh on activity. The downward revision is sharper for emerging market and developing economies than for advanced economies.

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