State Bank of India research report Ecowrap’s latest edition projected FY22 GDP growth to be at 8.2-8.5 per cent. It projected Q4 growth numbers at 2.7 per cent. “We are projecting GDP growth for FY22 at 8.5 per cent and Q4 FY22 at 2.7 per cent. We however believe the GDP projection for Q4 FY22 is clouded by significant uncertainties. For example, even an 1 per cent downward revision in Q1 GDP estimates of FY22 from 20.3 per cent, all other things remaining unchanged could push Q4 GDP growth to 3.8 per cent,” it stated.
The report added that the CSO had projected Q4 GDP at Rs 41.04 lakh crore and FY22 real GDP growth at Rs 147.7 lakh crore. However, SBI Nowcasting model pegs the quarterly numbers at Rs 40 lakh crore, which is lower by Rs 1 lakh crore from the CSO projections. Downward adjustments in Q1, Q2, Q3 numbers could ease Q4 GDP numbers. “Every Rs 10,000 crore revision adds/subtracts 7 basis points from the GDP growth,” it added.
Early trend of Q4 FY22 results from the industry shows better numbers across parameters as compared to Q4 FY21, although there has been contraction in operating margin due to higher input cost, it added. “Sectors such as Steel, FMCG, Chemicals, IT-Software, Auto Ancillary, Paper, etc. reported better growth numbers. However, sectors such as Automobile, Cement, Capital Goods – Electrical Equipment, Edible Oil etc. though reported growth in top line in Q4FY22, registered negative growth in PAT, as compared to Q4 FY22,” it said.
The Ecowrap report added that while Q1 2022 growth has been better on-year for 25 economies at 5.5 per cent than the preceding quarters, there has been an abrupt reversal in major economies such as US, France, Italy, Sweden etc. US economy contracted in the Q1 2022 amid a resurgence in COVID-19 cases.
Amid the Ukraine-Russia war, inflation is on a high, the report added. “Investors are already wary of rising inflationary pressures, however, certain 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,” it said. With the demand for Brent crude hiked in 2022, as compared to 2021, the production is also likely to go up, it said. “We are sceptical that crude prices may not sustain at this high level for long,” it said.
The RBI is expected to increase interest rates in the June cycle, it said. “The friction in coordination between monetary and fiscal authorities has been a thorny issue globally in recent years particularly after the global financial crisis. Against this background the policy response by RBI and Government needs to be wholeheartedly complemented,” it said.
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