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SBI cuts GDP estimates to 4.6% for current fiscal

09 Jan 2020 Evaluate

State Bank of India (SBI) in its latest research report ‘Ecowrap’ has lowered its Gross domestic product (GDP) growth forecast for FY20 to 4.6% based on current available trends from the earlier 5%. The report even predicted growth rate to remain below 6% for the two years in a row. It mentioned that the FY20 GDP estimate as released by the Central Statistics Office (CSO) pegs the GDP growth rate at 5%, a 11-year-low. Nominal GDP growth at 7.5% is a 42-year-low. For FY20, the budgeted nominal GDP growth rate was 12% which has now been revised downwards to 7.5%. Based on this GDP revision, the impact on fiscal deficit is around 12 basis points for FY20.

It clarified this estimate has a shelf-life of two months and is only used as an input for budget calculations. It said that the CSO will release the first revised estimate of FY17, FY18 and FY19 on January 31 and based on that, GDP and GVA for FY20 would be revised further downwards in second advance estimate for FY20 on February 28 and on May 29.

It added that agriculture and allied activities are likely to grow at 2.8% in FY20, against the previous year growth of 2.9%. Moreover, it highlighted that factors like government expenditure are the key factors in determining the overall growth outlook for FY20 as variations in government spending have a spill over effect on other sectors. In Q2, government spending alone accounted for 40% of the entire quarter's growth (1.9% out of 4.5% headline GDP growth), even as its share in GDP was lower than 13%.

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