India's Q4 GDP pegged at 2.7%, lower than Q3: Experts
What's the story
According to SBI's economists, the upcoming release of official statistics for economic performance is likely to show 2.7% growth for the January-March quarter and 8.5% growth for FY22. Moreover, analysts predict a broad range of growth rates for the quarter, ranging from 2.7-4.5%. While SBI forecasts a 2.7% growth, ICRA expects 3.5% and CRISIL predicts 4.5% growth in the fourth quarter of 2021-22.
Context
Why does this story matter?
All major rating agencies predict lower Q4 GDP growth than the previous quarter. "We...believe the GDP projection for Q4 FY22 is clouded by significant uncertainties. For example, even a 1% downward revision in Q1 GDP estimates of FY22 from 20.3%, all other things remaining unchanged, could push Q4 GDP growth to 3.8%," SBI noted. Official economic data is set to be released on Tuesday.
Reason
Why is India's GDP witnessing slow growth in Q4?
According to SBI Ecowrap, the economic activities, which increased in Q2 FY22 with the second COVID-19 wave receding, have slowed since Q3, aggravated by the Omicron spread in Q4. Since February 2022, however, the positive effects of the swift decline in Omicron infections have been overpowered by geopolitical conflicts, pushing inflation above the topmost tolerance level, adversely affecting GDP growth in the fourth quarter.
Fact
Several sectors witnessed negative profit growth
Reportedly, steel, FMCG, chemicals, IT, and auto ancillary sectors have reported higher growth rates, while sectors such as automobiles, cement, capital goods, and edible oil reported negative profit growth. Meanwhile, economists believe crude oil prices will not remain high for a long time and that the Reserve Bank of India (RBI) will hike rates again at its June policy review as well.
ICRA
ICRA forecast for Q4
ICRA has forecast year-on-year GDP growth of 3.5% in Q4 FY2022, down from 5.4% in Q3. It predicts so due to the impact of higher inflation, decrease in wheat yields, and COVID-19 third wave-induced economic slowdown. "We expect both agriculture and industry to post a sub-1% GVA (gross value added) growth in Q4...whereas services growth is expected to print at around 5.4%," ICRA stated.
CRISIL and CSO
CRISIL and CSO's forecasts for Q4
DK Joshi, Chief Economist of rating agency CRISIL, expects GDP to grow at 4.5% in Q4 of FY22. Meanwhile, the Central Statistics Office forecasted a Q4 GDP of Rs. 41.04 lakh crore and FY22 real GDP growth of Rs. 147.7 lakh crore, representing 1.7% growth. It noted the SBI Nowcasting model pegs Q4 growth at Rs. 40 lakh crore, lower than CSO preliminary projections.
Reuters
'Reuters' poll for Q4 GDP growth
In a May 23-26 Reuters survey, growth in Asia's third-largest economy was pegged at 4% for the January-March quarter compared to the same period a year ago, down from 5.4% in Q4 2021. India's GDP increased by 5.4% in Q4 of 2021, down from 8.4% in the previous quarter. However, it was significantly higher than the 0.5% growth in the same period in FY21.