Ahead of the March quarter FY22 GDP growth data due next week, most economists believe that impact of the surge in oil prices due to Russia’s invasion of Ukraine was very limited as retail fuel prices were raised only after the recent round of state elections, a report by Business Standard stated.
“Fuel prices increase due to the war did not get passed on till very late in Q4 as prices were increased only after the elections. The latter part of March would have been impacted to some extent. Service sector growth would be more pronounced from April onwards. There could be some weakness in agriculture and manufacturing may also be nothing to write home about in Q4," Busines Standard report quoted DK Joshi, Chief Economist with Crisil.
However, experts also admit that predicting the FY22 number is difficult because there are likely to be revisions to GDP numbers for FY21 and the first three-quarters of FY22.
India’s GDP could grow by around 2.7 percent for the January-March quarter, State Bank of India’s Chief Economic Advisor Soumya Kanti Ghosh told BS. Ghosh expects FY22 GDP growth to be around 8.5 percent, but warns that Q4 numbers could shift considerably based on revisions of previous quarters.
“Q4FY22 GDP numbers are due for release on 31 May and it is difficult to comprehend the numbers as a spate of customary quarterly revisions in FY22 could make it a forecaster’s nightmare. We are projecting GDP growth for FY22 at 8.5 percent and Q4FY22 at 2.7 percent,” BS quoted Ghosh.
As per the report, Ghosh noted that the Q4 projection is clouded by significant uncertainties as even a 1 percent downward revision in Q1FY22 GDP estimates, all other things remaining unchanged, could push Q4 GDP growth to 3.8 percent.
“We believe that downward adjustments in Q1, Q2, and Q3 numbers could have a soothing impact on Q4 GDP numbers. Every ₹10,000 crore revision adds/subtracts 7 basis points from GDP growth,” Ghosh said.
Meanwhile, Rahul Bajoria, India Economist with Barclays, also expects revisions to previous quarters’ GDP print, said the BS report. “The January-March quarter is going to be a high watermark as far as profitability is concerned. From April-June onwards, you are going to see margin compression make a bigger play due to inflation,” Bajoria told BS.
As per the report, Bajoria sees Q4 GDP growth at 3.7 percent and FY22 at 8.8 percent.
Further, Bank of Baroda Chief Economist Madan Sabnavis said there was a pent-up demand in the service sector, which did well in spite of Omicron's fears. Sabnavis has projected Q4 growth at 5.5 percent and FY22 at 9.2 percent, it added.
“We are looking at no change in GDP of previous three quarters. We have seen a rapid improvement in the services sector. The omicron wave did not affect services as much and we saw a major boom, especially in March,” Sabnavis told BS.
Aditi Nayar, Chief Economist with ICRA ltd, projects that Q4 GDP will be 3.5 percent and GVA will be 2.7 percent, the report highlighted.
“This is on account of the impact of higher commodity prices on margins, decline in wheat yields and the hiccups in the recovery of the contact-intensive services attributable to the third wave of Covid-19 in India,” she told BS, disagreeing with assessments by other economists quoted above. Nayar said she was apprehensive that both agriculture and industry will post a sub-1 percent GVA growth in Q4, whereas services growth will print at around 5.4 percent.
