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ASIA ECONOMICS: SocGen Boosts Its FY21-22 GDP Growth Estimate for India

· 02/08/2021 00:49

05:48 AM EST, 02/08/2021 (MT Newswires) -- Societe Generale said that it revised up its forecast for India's FY2021-22 real gross domestic product (GDP) growth from 7.6% y/y to 9.4% y/y.

The change in the bank's outlook (while it might appear rather large) was necessitated by two important developments: i) a marked slowdown in the spread of COVID-19 (currently at less than 10% of peak daily rate), despite a potential second wave having looked likely in end-November 2020, and ii) an early roll-out of the vaccine (mid-January 2021).

SocGen had flagged both factors (a continued rapid spread of COVID-19 and a much later introduction of the vaccine) as important risk events influencing its forecast for FY2021-22.

That said, the bank saw the possibility of even higher real GDP growth if the Indian government had embarked on some hefty stimulus measures -- these were conspicuous by their near-total absence during FY2020 21 when India needed them the most to fight the pandemic.

Various official views in January had also appeared to make that scenario a real possibility, added SocGen. Even the customary Economic Survey (a document that was generally released a few days before the presentation of the union budget) made a strong case for counter-cyclical fiscal policy.

However, once the budget was presented, it became quite clear that there wouldn't be an "adequate" short-term stimulus to push real GDP growth to the 11% y/y level that the government was currently expecting, according to the bank. As a consequence, the bank kept its upwardly revised real GDP growth at 9.4% y/y.

SocGen's detailed forecast will be made available in the India country briefing section in the upcoming Global Economic Outlook in March.