Explained: SBI projects growth of 8.1% in India’s GDP in Q2

India’s GDP is expected to grow by 8.1 % of 2021, according to the State Bank of India. It also downgraded its GDP growth forecast for the year to 9.3-9.6%. The report, which stated that India’s GDP would grow at 8.1% in Q2 FY’22 (with an upward bias), also revised SBI’s GDP forecast for the year to 9.3-9.6%, up from its previous estimate of 8.5-9%.

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According to a report prepared by SBI’s chief economic adviser, Soumya Kanti Ghosh, India’s real GDP will be around Rs 2.4 lakh crore higher than the Rs 145.69 lakh crore recorded in 2019-20. “Momentum of economic growth is likely to remain on the upside,” it added, citing the fact that a large percentage of the population has already been vaccinated. 

SBI’s GDP forecast for the year is 9.5%, which is in line with the Reserve Bank of India’s estimate.

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The upward revision is due to relatively less disruption in Q3 and a pick-up in economic activity, which the report claims has returned to pre-COVID levels. According to the report, India was unaffected by the global situation in Q3 2021, which was marred by supply disruptions, stubborn inflation, and outbreaks of infections.

“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.

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According to the report, a resurgence in COVID infections hampered growth in several leading countries, which were also hindered by supply shortages and production activity. While US GDP growth slowed to 4.9% (y-o-y) in Q3 2021 from 12.2% in Q2, China’s economy expanded by 4.9% (y-o-y) in Q3, compared to 7.9% in Q2, as factory activity suffered a major setback amid multiple headwinds. In Q3, the average GDP growth rate of 28 selected economies slowed to 4.5%, down from 12.1% in Q2.