Explained: Why SBI projects India’s GDP to grow by 8.1% in Q2 this year

SBI has also revised its GDP growth projection for the year to 9.3-9.6 per cent.

SBI stated that the upward revision is on account of pick-up in economic activity, which it said had reached pre-Covid levels. (Express Archive)

The State Bank of India has projected that India’s GDP will grow by 8.1 per cent in the second quarter ending September 2021. It has also revised its GDP growth projection for the year to 9.3-9.6 per cent.

Also In Explained | ExplainSpeaking: Will a legal guarantee on MSP solve India’s farm distress?

What does the report say?

Stating that India’s GDP would expand at 8.1 per cent in Q2 FY’22 (with an upward bias), the report released by SBI on Monday also revised its GDP forecast for the year to 9.3-9.6 per cent from its earlier estimate of 8.5-9 per cent.

Story continues below this ad

The report prepared by Soumya Kanti Ghosh, SBI’s chief economic adviser, stated that India’s real GDP will be around Rs 2.4 lakh crore more than the real GDP of Rs 145.69 lakh crore registered in the year 2019-20. It added that with a large percentage of the population already vaccinated, “momentum of economic growth is likely to remain on the upside”.

SBI’s GDP projection for the year is in line with the Reserve Bank of India’s estimate of 9.5 per cent.

What is the reason for the upward revision?

According to the report, the upward revision is on account of relatively less disruption in Q3 and pick-up in economic activity, which it said had reached pre-Covid levels. It stated that India remained unscathed in Q3 from the global situation, which is marred by supply disruptions, stubborn inflation and surges of infections during Q3 2021.

Story continues below this ad

“India recorded only 11 per cent increase in cases during Q3 which is second lowest among top 15 most affected countries. Further, the total Covid-19 active cases reached the lowest of 1.24 lakhs since June 2020 and India’s cumulative COVID-19 vaccination coverage exceeds 1.15 billion-mark. With this, the economic activity has gained momentum and reached pre-Covid level,” the report read.

How does it compare to global growth?

According to the report, growth across several leading countries were impacted by resurgence in Covid infections and weighed down by supply shortages and production activity. While US GDP growth nosedived to 4.9 per cent (y-o-y) in Q3 2021 from 12.2% in Q2, for China, growth momentum lost its pace in Q3 and the economy expanded by 4.9% (y-o-y) vis-a-vis 7.9% in Q2 as factory activity took a major hit amidst multiple headwinds. The average GDP growth of 28 selected economies decelerated to 4.5% in Q3 as against 12.1% in Q2.

Newsletter | Click to get the day’s best explainers in your inbox