India's GDP contraction due to the impact of Covid pandemicis expected to narrow down to (-)7.4 per cent in FY21 from an earlierprojection of (-)10.9 per cent, SBI Ecowrap report said on Wednesday.
"Our revised GDP estimates are based on SBI 'NowcastingModel' with 41 high frequency indicators associated with industry activity,service activity, and global economy," the report said.
"We have used the dynamic factor model to estimate thecommon or representative or latent factor of all the 41 high frequencyindicators from Q4 of 2012 to Q4 of 2020 (till November actual data is usedwhile trend is used for December)."
Accordingly, the report said based on this model theforecasted GDP growth for Q3 would be around 0.1 per cent (with downward bias).
Besides, out of the 41 high frequency leading indicators, 58per cent are showing acceleration in Q3.
"Positive momentum of various economic indicatorsincluding RTO transactions, revenue collection at RTO, revenue earning of freighttraffic, weekly food arrival, petrol and diesel consumption continued inNovember," the report said.
"Even our business activity index which is based onhigh frequency indicators show improving momentum after a modest decline in theweek of Diwali."
Furthermore, the FY22 GDP growth would be at 11 per centprimarily due to base effect.
However, the report said all projections are conditional onthe absence of another wave of infections.
"We believe that it will take almost 7-quarters from Q4FY21 (and 5-quarters from now) to reach the pre-pandemic level in nominal termsand there will be a permanent output loss of around 9 per cent of GDP,"the report said.
"Interestingly, even as growth outlook has improved,the decline in Government expenditure has been quite significant to Rs 3.62lakh crore in Q2 FY21 from Rs 4.86 lakh crore in Q1 FY21."
"The revenue and capital expenditure both declined inQ2 compared to Q1, with larger decline witnessed in revenue expenditure."
(Source: IANS)