WEB DESK
In an alarming revelation, State Bank of India, SBI, the country’s largest lender, has predicted that India’s Gross Domestic Product (GDP) growth may slip to a record low of 4.2 per cent in the second quarter amid low automobile sales, deceleration in air traffic movements, flattening of core sector growth and declining investment in construction and infrastructure.
India GDP growth has already hit a 6-year low of 5 per cent during June quarter of this fiscal (Q1FY20).
“Based on our composite leading indicator suggests GDP growth to slowdown further from 5 per cent in Q1 of FY20 to 4.2 per cent on account of low automobile sales, deceleration in air traffic movements, flattening of core sector growth and declining investment in construction and infrastructure,” says SBI Ecowrap report.
The SBI report said that 33 high frequency leading indicators revealed an acceleration rate which was 65 per cent in Q1FY19 declined sharply to 27 per cent in Q2FY20.
The lender has also cut GDP forecast for FY20 to 5 per cent from 6.1 per cent earlier but expects the growth rate to pick up pace in FY21 to 6.2 per cent.
“We, however, believe this growth rate in FY20 should be looked through the prism of synchronised global slowdown (countries have witnessed 22-716 basis point decline between June’18 and Jun’19, and India cannot be isolated). India is also significantly lower in Economic Uncertainty Index when compared globally,” the report noted.
Last month, while reducing the key policy rate (repo) by 25 basis points for the fifth time in a row, the RBI had also reduced its growth forecast to 6.1 per cent for 2019-20 from 6.9 per cent.
Meanwhile, the SBI research report said, “We are revising our GDP forecast for 2019-20 to 5 per cent from 6.1 per cent earlier.”
India’s GDP growth had dipped to about a six-year low of 5 per cent in the first quarter of the fiscal.
“We expect Q2GDP growth at 4.2 per cent. Our acceleration rate for 33 leading indicators at 85 per cent in October 2018 is down to just 17 per cent in September 2019, with such decline gaining traction from March 2019,” the report said, while terming the decline in September IIP by 4.3 per cent as “quite alarming”.
Ecowrap further said that the growth rate in 2019-20 “should be looked” through the prism of synchronised global slowdown (countries have witnessed 22-716 basis point decline between June 2018 and June 2019, and India cannot be isolated!).