August 18, 2020: The Indian economy may contract by 16.5% in the quarter ended June, compared to earlier estimates of a decline of more than 20 per cent, on better-than-expected corporate earnings, according to economists at State Bank of India.
“We revisit our GDP growth estimation for Q1 FY21 (at lower than -20 per cent)and now peg it at much lower contraction: -16.5 per cent, though with the relevant caveats in the current uncertain scenario,” SBI economists said.
They pointed that specifically, degrowth in Corporate GVA (gross value added) is significantly better than revenue degrowth in Q1FY21 as far as the results of the listed companies are concerned.
“In principle, revenue decline of listed companies has been far outstripped by cost rationalization thereby not impacting margins. Our Composite Leading Indicator and Monthly Acceleration Tracker also support the same. Our Business Disruption Index has also shown a decline in the most recent week,” the economists said.
However, they believe the rural recovery is unlikely to support such pace in subsequent quarters as overall, the per capita monthly expenditure in urban areas is at least 1.8 times of rural areas and rural wage growth in real terms might still be negative.
“ This indicates that rural recovery will not have much impact on GDP growth. Thus, it is of utmost importance to unveil further steps to support growth,” they added.
Using the bottom-up approach, they also estimated total GSDP loss due to Covid-19 is at 16.8 per cent of GSDP.
State-wise analysis indicates that top 10 states accounted for 73.8 per cent of total GDP loss with Maharashtra contributing 14.2 per cent of total loss followed by Tamil Nadu (9.2 per cent) and Uttar Pradesh (8.2 per cent), the report said.
Subsequently, the per capita loss for all India is around Rs 27,000 with states like Tamil Nadu, Gujarat, Telangana, Delhi, Haryana, Goa, etc. exhibiting loss of more than Rs 40,000 per person in FY21, the economists added.
Source: The Economic Times
