India may become the second-fastest economy by GDP growth after China when the fourth-quarter growth numbers are announced next week.
Domestic rating agency Icra on Monday forecast a 2 per cent uptick in growth during the March FY21 quarter, and 3 per cent from the gross value-added perspective.
This would make India the second-fastest country after China, which logged an 18.3% growth in the fourth quarter.
This would mean that the NSO projection of a double-dip contraction would be avoided.
However, the likely consequence of any upward revision in FY21 estimates is a concomitant decline in FY22 GDP estimates.
Icra and SBI Research both have projected a full-year contraction at 7.3 per cent.
However, according to SBI Research, India will clock 1.3% growth in GDP in the fourth quarter, but would still be the fifth fastest-growing among 25 countries.
What lies ahead
Though the impact of the second wave on the real economy was initially thought to be much limited, estimates now indicate that there might be a nominal GDP loss of up to Rs 6 lakh crore during Q1 FY22 as compared to a loss of Rs 11 lakh crore in Q1 FY21, SBI Research said.
Real GDP loss would be in the range of Rs 4-4.5 lakh crore and hence real GDP growth would be in the range of 10% -15% (as against RBI forecast of 26.2%) during Q1FY21.
With the health crisis overwhelming the country, the impact on GDP in the second wave will be more from the health channel than the mobility channel, it said adding, that sequential momentum of leading indicators is at all-time low.
“The population which has been scared from two waves of the pandemic will take time to go back to normal business. So, it will be tough going this quarter and perhaps also next quarter,” said Taimur Baig. MD & Chief Economist, DBS Bank Singapore, in his keynote address at the 2nd BFSI Virtual Summit.
However, the call for a wholesale downfall is premature, Baig said adding, that the downfall risk has increased but still there are know-how protocols that will allow to rise through this storm, Baig said.
Another aspect that can hobble recovery is inflation, Wholesale price index registered another major upside surprise, surging to 10.5% year on year in April, the highest level in 131 months. This is also the first time WPI has been in double digits in almost a decade. With base effects remaining adverse, upward momentum in food and other commodity prices could push WPI even higher in May..
While fuel prices softened in April, May could see a reversal as domestic prices rise again in line with international crude prices. Core WPI inflation recorded another significant gain, rising for the 11th consecutive month in April. Prices rose across the board, with core CPI inflation accelerating to 8.3% year on year- the highest since November 2011.
Though the real GDP data across countries indicates that the situation has improved over one year (after battling from the second/third wave of Covid-19), most of the countries are still in recession and their Q1 2021 (or Q4 FY21) real GDP was in contraction mode, with an average contraction of around –0.3% in the range of -6.1% (UK) to 18.3% (China).
Very few countries exited recession in Q1 2021, SBI Research said, adding, “Had India’s growth rate crossed 1.7% in Q4FY21, India would have been the second-fastest country after China in terms of GDP growth, and going by our estimate of 1.3% GDP growth India would still be the 5th fastest growing country amongst 25 countries.”