SBI, in its Ecowrap report, projected India's GDP growth for FY22 at 8.5% and Q4 FY22 at 2.7%, though it believes the projection for the Jan-March quarter is clouded by significant uncertainties. The Q4 FY22 GDP numbers are due for release on May 31.

Explaining the rationale behind the difficulty in predicting the fourth-quarter numbers, the SBI report cites a spate of customary quarterly revisions in FY22 for not being able to accurately forecast the growth.

“For example, even a 1% downward revision in Q1 GDP estimates of FY22 from 20.3%, all other things remaining unchanged could push Q4 GDP growth to 3.8%,” the report says.

Nevertheless, the FY22 GDP numbers could move closer to 8.5% as the Q4 GDP numbers as per the SBI nowcasting model, says the SBI Research report.

India's gross domestic product (GDP) in the third quarter of the financial year rose 5.4% year-on-year to ₹38.22 lakh crore. For fiscal 2021-22, the real GDP growth estimate was revised by the Centre downwards to 8.9% compared with the earlier forecast of 9.2%. The government’s estimate is 1.8% above the pre-pandemic (2019-20) level.

According to SBI, the other big puzzle could be the gap between GVA and GDP numbers in Q4, given the strong growth in tax collections. “This could push up the GDP number significantly, even as GVA might be much lower,” the report flags.

Leading ratings agency ICRA this week also said the GDP growth and gross value added (GVA) at basic prices in Q4 seem to have eased to a tepid 3.5% and 2.7%, respectively. Prime reasons for slower recovery are believed to be higher commodity prices on margins, a decline in wheat yields and the hiccups in the contact-intensive services amid Covid-19 and a high base.

The early trend of Q4 FY22 financial results by listed companies reported better growth numbers across parameters as compared to Q4 FY21, despite a contraction in operating margin due to higher input cost.

Sectors such as steel, FMCG, chemicals, IT-software, auto ancillary, paper, etc. reported better growth numbers. However, automobile, cement, capital goods -- electrical equipment, edible oil etc., registered negative growth in PAT.

Meanwhile, globally, while the average real GDP y-o-y growth in Q1 2022 for 25 economies at 5.5% is a tad higher than the preceding quarter, GDP growth is marking an abrupt reversal in major economies (the US, France, Italy, Sweden, etc.,), the report highlights.

“Global financial volatility continues…economic data including new jobless claims rising to a 4-month high and negative leading index have further sparked concerns that pricing pressures are starting to now take a toll on economic growth.”

Meanwhile, Brent crude also remains sticky, with the total world demand for crude for 2022 at 100.29 mb/d compared to 96.92 mb/d in 2021. Additionally, the RBI may hike rates in the June policy meeting and the cumulative rate hike in June and August is likely to be 75 basis points, thus slowing the economy.

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