SBI cuts growth forecast to 10.4%

Given the current circumstances of partial, local and weekend lockdowns in almost all the States, we are revising downwards our growth forecast to 10.4% real GDP and 14.3% nominal GDP in FY22 -Soumya Kanti Ghosh, Group Chief Economic Advisor, SBI

Mumbai: With Covid cases rising steeply fuelled by the second wave and many States imposing curbs, Ecowrap, the research wing of the country's largest lender SBI, has slashed real GDP for the current fiscal to 10.4 per cent from 11 per cent earlier and the nominal GDP to 14.3 per cent (15 per cent).

"Given the current circumstances of partial, local and weekend lockdowns in almost all the States, we are revising downwards our growth forecast to 10.4 per cent real GDP and 14.3 per cent nominal GDP in FY22," Soumya Kanti Ghosh, Chief Economic Advisor, SBI, who wrote the report, said. Total loss arising from the limited lockdowns is estimated at Rs 1.5 lakh crore; of which, Maharashtra, MP and Rajasthan account for 80 per cent and Maharashtra alone at 54 per cent, he explained.

According to the report, SBI business activity index showed decline in activity in April 2021 with the latest reading for the week ended April 19, 2021 of 86.3. This is the lowest in 5 months. All the indicators have shown a dip with maximum decline in Apple mobility, weekly food arrival at Mandis and RTO revenue collection.

The SBI report also suggested that faster vaccination is cheaper on the economy than complete lockdowns, pointing out that the total cost of vaccination is much lower at 0.1 per cent of GDP while the lockdowns has already cost 0.7 per cent of GDP. Now that States are free to buy vaccines directly from the manufacturers from May 1, our estimate for 13 large States shows that the cost of vaccine to inoculate will be only 0.1 per cent of their collective GDP. This is significantly lower than the economic loss in GDP due to lockdown which is already at 0.7 per cent of GDP, it said.

All scheduled commercial banks (ASCBs) saw decline in credit to a 59-year low of 5.6 per cent in 2020-21, compared to 6.1 per cent growth in 2019-20. On the other hand, deposits have increased to 11.4 per cent in FY21, compared to 7.9 per cent growth in FY20, the report pointed out. In FY21 Apr-May, huge monthly incremental increase in deposits was observed (particularly time deposits) as people had fewer options to spend due to nation-wide lockdown. This time also we expect large traction in time deposits as most of the States imposed partial lockdown, Gosh said. Meanwhile, early trend of around 45 listed entities suggests 10 per cent growth in top line for listed entities while EBIDTA and PAT too grew by 16 per cent and 26 per cent per cent in Q4FY21 as compared to Q4FY20. Entities with turnover of less than Rs 100 crore reported 6 per cent growth in net sales and negative PAT despite cut in employee expenses by 10 per cent. In commercial paper market, yield continue to be below 4 per cent and decreased to 3.71 per cent in April against 4.35 per cent in March. On the Covid pandemic, the report said the injection to infection ratio showed that India made rapid improvement this year, but it is still below Israel, Chile and UK. The 'Vaccine Hesitancy Index' calculated as doses administered per 100 available shows that all N-E States and in States like Goa, Jharkhand, Assam, Delhi, Uttarakhand, Chhattisgarh, there is a vaccine hesitancy, the report said.