SBI expects GDP growth to dive below 3% in Q4, 2021-22

Overall growth last year could be between 8.2% and 8.5%

India’s GDP growth in the fourth quarter (Q4) of 2021-22 could be as low as 2.5% to 2.9%, State Bank of India (SBI) economists have estimated, almost half the 4.8% growth projected earlier by the National Statistical Office (NSO), which will release the official data on May 31.

While the NSO’s previous estimate had pegged GDP growth at 8.9% in 2021-22, a report from SBI’s group chief economic adviser Soumya Kanti Ghosh said a range of 8.2% and 8.5% is more likely, with the pace of economic activity slackening in Q4 owing to the Omicron wave and the ‘geopolitical conflagrations’ since February.

“Economic activity, which gained strength in Q2 of 2021-22, with the ebbing of the second wave, has lost pace since Q3… the Q4 GDP numbers are expected to be much lower than Q3 [when GDP grew 5.4%] indicating a continuous deceleration in growth since the starting of the year,” the report said, adding that Q4 also marked the resurgence of retail inflation beyond the tolerance threshold of 6%.  

The NSO had projected Q4 GDP at ₹41.04 lakh crore, 1.7% over pre-pandemic levels, but an SBI model using high-frequency indicators suggested this may be closer to ₹40 lakh crore. “As per our ‘Nowcasting Model’, the forecasted GDP growth for Q4 FY22 would be 2.7%, with a downward bias,” it said. SBI’s growth estimate for Q4 is lower than the 3.5% rate projected by rating agency ICRA recently.

Though India’s recovery remains resilient, risks stemming from global developments have thwarted the momentum, and the runaway commodity prices which is ‘a net terms of trade shock’ widening the trade and current account deficits, the report emphasised. While the global growth outlook is grim as the Ukraine-Russia conflict lingers on, withdrawal of monetary accommodation is gathering speed and emerging economies face risks of capital outflows, it noted.  

In terms of Gross Value added (GVA) in the economy, SBI said that corporate GVA is positively correlated to Manufacturing GVA, has been decelerating trend since Q4 of 2020-21. “The corporate results announced so far indicate that there is only moderate recovery in corporate GVA in Q4 FY22. The corporate GVA of 3782 companies registered a growth of 15.2% in Q3 FY22,” the report pointed out.