SBI economists cut FY22 GDP growth estimate to 7.9pc; lowest among all analysts

SBI economists on Tuesday sharply slashed their FY22 GDP growth estimates to 79 per cent ndash the lowest among all analysts ndash from the earlier projection of 104 per cent growthThe economists at the staterun lender seemed to attribute the impact of the second wave of Covid19 infections as a key factor for the revision in the growth estimate and pitched for faster vaccinationhellip our analysis shows a disproportionately larger impact on the economy this time and given that rural is not as resilient as urban the pickup in pentup demand is unlikely to make a large difference in FY22 GDP estimates and hence it could only be a modest pickup they saidThe SBI economists said the increasing international commodity prices will also have an impact on the GDP growth and added that the overall consumption trajectory will depend on the recovery in trade hotels transport communication and services related to broadcasting services which supports roughly 25 crore householdsThey however said that at Rs 1458 lakh crore the real GDP for FY22 will be ldquoslightly higherrdquo than those in FY20 and called it a Wshaped recovery with two troughs and not the earlier anticipated Vshaped recoveryThe RBI has maintained its growth estimate at 105 per cent despite the emergence of the second wave and may have a relook at the number at this weeks policy reviewOther analysts have been revising down their estimates after the devastating second wave with an 85 per cent growth being lowest among the predictionsOfficial data released on Monday said the economy grew at faster than expected at 16 per cent for the fourth quarter of FY21 resulting in a contraction of 73 per cent for the entire fiscalThe high growth number in FY22 is due to the lower base and there are concerns around whether the economy will reach the prepandemic levels in FY22The SBI economists said an upward bias to its growth estimate of 79 per cent is possible if the country indeed delivers on the stated aim of 1 crore vaccines a day by midJulyAlso ReadRBI imposes Rs 10 crore penalty on HDFC BankWhile arriving at the 79 per cent estimate the SBI economists divided districts into multiple categories based on the proportion of urban population in each of the districts and said that those districts with less than 50 per cent urban population have seen a greater increase in deaths during the second waveIt explained that such rural pockets account for lesser economic activity but the rural pockets are not as resilient as the urban ones when it comes to revivalStates where tier2 centres are affected more like Gujarat Haryana Jharkhand Kerala Rajasthan and Uttarakhand are likely to contribute more to the GDP loss this year they saidThe note said there was a downward revision of growth to 104 per cent from the earlier 11 per cent at the beginning of the second wave but the extension of the lockdowns beyond June in several states has resulted in a relook at the number saying there will be a loss of Rs 43 lakh crore more if the activity were to normalize in JulyThis story has been sourced from a third party syndicated feed agencies Midday accepts no responsibility or liability for its dependability trustworthiness reliability and data of the text Midday managementmiddaycom reserves the sole right to alter delete or remove without notice the content in its absolute discretion for any reason whatsoever