India Ratings trims India's GDP growth forecast to 8.6% on data revision

24 Feb 2022 , 02:49 PM

India Ratings has downgraded India’s GDP growth forecast for FY2021-22 from 9.2% projected earlier to 8.6% now.

The National Statistical Organisation (NSO), is likely to release its second advance of national income on Monday. It has forecasted a real GDP growth of 9.2% in the previous estimate. According to the analysis done by India ratings, NSO is likely to quote FY22 real GDP growth at Rs147.20 lakh crore.

The major reason for this likely downgrade is the revision of FY21 GDP upward to Rs135.6 lakh crore in the first revised estimate of national income for FY21, which was released on January 31, 2022, the agency stated.

Consequently, GDP for FY21 is improved to -6.6% against the provisional estimate of -7.3% released in May 31, 2021.

The GDP drivers’ growth rates from demand side have witnessed a change due to these revisions and so, quarterly GDP numbers are expected to change this year. These drivers include gross fixed capital formation, government’s final consumption expenditure, and private final consumption expenditure.

The agency expects a downward revision in GDP growth of all the four quarters owing to a downward revision in FY20 growth numbers.

Accordingly, as per the agencies’ estimates Q1 and Q2 of FY22 may shed 90-110 basis points than estimated earlier, and the Q3 & Q4 may come in at 5.6 per cent and 5.1 per cent, respectively, down from 6 per cent and 5.7 per cent estimated earlier.

However, the period considered is too short for arriving at a conclusion, stated the agency.

While other rating agencies Barclay’s and Moody’s have also cut India’s GDP growth estimates to 6% and 7% respectively.