GDP estimated to grow at 18.5%: SBI Ecowrap

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Gross domestic product (GDP) is estimated to grow at around 18.5% with an upward bias in the Q1 of FY 22, the SBI Ecowrap said in its latest report. On contrary, RBI had estimated a higher GDP projection of 21.4% for the April-June quarter. The report which is based on the ‘nowcasting’ model, stated that the forecasted GDP growth for Q1 FY22 would be around 18.5%. The higher growth in the Q2 of FY22 or q1 FY22 is due to the low base. The ‘Nowcasting Model’ is developed by the State Bank of India. It has 41 high-frequency indicators which are linked to industrial activity, service activity, and the global economy.

The gross value added (GVA) is likely to be at 15% in Q1FY22, the report noted.

Recovery in corporate GVA

There has been a significant recovery in corporate GVA EBIDTA (earnings before interest, taxes, depreciation, and amortisation) + employee cost) in Q1 FY22 as per the corporate results that have been announced till now. In Q1 FY22, the corporate GVA of 4,069 companies registered a growth of 28.4%, which as compared to the growth in Q4 FY21, is lower.

This has been observed on a global level, that lower mobility results in lower GDP and higher mobility in higher GDP, but the response is asymmetric. The report noted that GDP declines when mobility is declining but the same does not happen in the opposite case. With an increase in mobility, the GDP growth does not increase in the same proportion.

SBI report observes that the relationship between the two has become weaker as can be seen in Q1 FY22 when mobility has declined, however, GDP growth is high and positive. But higher y-o-y growth is mainly on account of the base effect.

The business activity index which is based on ultrahigh-frequency indicators depicts a rise in August 2021. The index’s latest reading for the week ended August 16, 2021, is at 103.3, it added.

The report points to a positive momentum in economic activity going forward in Q2 FY22 as RTO (regional transport office) collection, electricity consumption along mobility indicators have revived.