GDP growth forecast may be revised downwards: India Ratings

Explaining the reason for the downward revision, the agency said the major reason for the likely downward revision was due to the fact that the central statistical office has revised the GDP growth for the last financial year (FY 2020-21) to Rs 135.6 lakh crore in the first revised estimate which was released on January 31, three weeks after the release of the first advance estimate of the current fiscal on January 7.

New Delhi: India’s GDP growth for the current financial year ending in March this year may be revised downwards from the earlier estimate of 9.2% to 8.6% when the second advance estimate of national income will be released early next week, said India Ratings and Research, a Fitch Group rating agency.

On a note, the rating agency which closely tracks government finances and macro-economic indicators said the second advance estimate of national income may peg the FY22 GDP growth at 8.6% and GDP growth in the third quarter (October-December 2021 period) at 5.6%.

A calculation by the rating agency suggested that the second advance estimate, which will be released on February 28, may peg the real gross domestic product (GDP) growth in the FY 2021-22 at Rs 147.2 lakh crore.

“This would translate into a GDP growth rate of 8.6% y-o-y for FY22 compared to 9.2% y-o-y in the 1st AE released on 7 January 2022,” said the agency.

Improvement in the base

Explaining the reason for the downward revision, the agency said the major reason for the likely downward revision was due to the fact that the central statistical office has revised the GDP growth for the last financial year (FY 2020-21) to Rs 135.6 lakh crore in the first revised estimate which was released on January 31, three weeks after the release of the first advance estimate of the current fiscal on January 7.

“As a result, the GDP growth of FY21 has now improved to negative 6.6 % from the provisional estimate (PE) of negative 7.3% released on 31 May 2021,” said the agency.

Besides this, the apex statistics organization of the country has also revised the GDP growth for FY 2019-20 to 3.7% from 4% earlier in the second revised estimate. However, the CSO has maintained the GDP growth rate for FY 2018-19 at 6.5%. Both these revised estimates were also released on January 31 this year.

The agency said though the growth rate for FY 218-19 remains the same, whereas growth rates of GDP drivers from the demand side, namely private final consumption expenditure (PFCE), government final consumption expenditure (GFCE), gross fixed capital formation (GFCF), have undergone a change.

“Due to these revisions, quarterly GDP growth numbers are also expected to undergo a change. As the FY20 GDP growth has been revised downwards, India Ratings now expects GDP growth of all the four quarters of FY20 to be lower than present estimates,” it said.

Impact on GDP growth rate in this fiscal

The agency said it would mean a likely upward revision of FY21 and a downward revision of FY22 quarterly GDP numbers.

According to the rating agency, it means the GDP growth rate estimates for the first and second quarter of the current financial year (April-June) and (July-September) may decline by around 0.9% to 1.1%.

Secondly, the estimated GDP growth rate for the third and fourth quarter, (October-December) and (January-March 2022) period, maybe revised downwards to just 5.6% and 5.1% as against earlier estimates of 6% and 5.7% respectively.