FY22 Q1 GDP expected to grow at 18.5%: SBI Ecowrap

State Bank of India said that GDP is expected to grow at 18.5 per cent in Q1 FY22. SBI’s forecast in its research report is, however, less than RBI’s expectation of 21.4 per cent. It also projected gross value added (GVA) to grow at 15 per cent.

“Based on the SBI Nowcasting model, the forecasted GDP growth for Q1 FY22 would be around 18.5 per cent (with upward bias). The GVA is estimated at 15 per cent. What is important is the possibility of a wide divergence between GVA and GDP because of strong tax collections. This is lower than RBI’s expectations of 21.4 per cent,” stated the SBI report.

The high growth projection is because of a low base. SBI stated that almost all the countries have registered a double-digit real GDP growth. The average real GDP growth for 17 economies has improved from -0.1 per cent in Q1 2022 to 12.2 Q2 2022.

SBI further stated that if corporate announcements so far are considered then a substantial recovery is visible in corporate GVA -- EBIDTA + employee cost -- in FY22 Q1. The overall corporate GVA of 4,069 companies registered a growth of 28.4 per cent in the first quarter. This growth is, however, lesser than the FY21 Q4 growth.

“It is globally noted that lower mobility leads to lower GDP and the higher mobility to higher GDP but the response is asymmetric,” SBI stated. The report stated that the relationship between mobility and GDP growth has become weaker as can be seen in Q1 FY22 when mobility has declined but GDP growth is high and positive.

“Meanwhile, business activity index based on ultra high frequency indicators show further increase in Aug ’21 with the latest reading for the week ended 16 Aug’21 at 103.3. RTO collection, electricity consumption along with the mobility indicators have revived in Q2 FY22, indicating positive momentum in economic activity going forward,” it said.

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