Covid surge: SBI slashes growth forecast to 10.4 per cent

The report penned by the bank's Chief Economic Advisor Soumya Kanti Ghosh also suggested that faster vaccination is cheaper on the economy than complete lockdowns

Mumbai: With India topping the global infection list for the third consecutive day and more states imposing restrictions, SBI Research on Friday cut its growth forecast for the current financial year to 10.4 per cent from 11 per cent earlier.

India reported over 3.34 lakh fresh Covid-19 cases in the past 24 hours. The report penned by the bank’s Chief Economic Advisor Soumya Kanti Ghosh also suggested that faster vaccination is cheaper on the economy than complete lockdowns, pointing out that the total cost of vaccination is much lower at 0.1 percent of GDP while the lockdowns has already cost 0.7 per cent of GDP.

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Now that states are free to buy vaccines directly from the manufacturers from May 1, our estimate for 13 large states shows that the cost of vaccine to inoculate will be only 0.1 per cent of their collective GDP. This is significantly lower than the economic loss in GDP due to lockdown which is already at 0.7 per cent of GDP, Ghosh said.

He further said that given the current circumstances of partial, local and weekend lockdowns in almost all the states, we are revising downwards our growth forecast to 10.4 per cent real GDP and 14.3 per cent nominal GDP in FY22. Total loss arising from the limited lockdowns is estimated at Rs 1.5 lakh crore; of which, Maharashtra, MP and Rajasthan account for 80 per cent and Maharashtra alone at 54 per cent, he said. With the entire Maharashtra is in lockdowns till month-end, its Rs 29.8 lakh crore economy will see an erosion of Rs 81,672 crore.

Meanwhile India Ratings and Research on Friday revised down India’s FY22 real GDP growth forecast to 10.1 per cent, from earlier projection of 10.4 per cent, citing the second wave of COVID-19 infections and slower pace of vaccination.

At a time when large parts of the country are experiencing tremendous pressure on medical infrastructure, the agency said it expects the second wave to start subsiding by mid-May. Earlier this month, the Reserve Bank maintained its 10.5 per cent GDP growth estimate, but Governor Shaktikanta Das has flagged the rising cases as the biggest impediment to recovery.

Other brokerages and analysts have also been revising down their forecasts in the light of the second wave. The economy is estimated to have contracted by 7.6 per cent in FY21.