August 22, 2023
Introduction
In a recent report, the State Bank of India (SBI) has offered an optimistic outlook for India’s economic growth, suggesting that the nation’s GDP could experience remarkable expansion in the upcoming quarters. SBI’s projections, developed using an Artificial Neural Network (ANN) model incorporating 30 high-frequency indicators, point to a potential GDP growth of 8.3 percent for the period of April to June 2023.
This anticipated growth rate, if realized, would mark the highest quarterly expansion in four quarters. It is worth noting that during the same period in 2022, the Indian economy had witnessed a significant upswing of 13.1 percent, primarily due to favorable base effects. While these effects remain a contributing factor, their influence is gradually diminishing.
The announcement by SBI’s Group Chief Economic Advisor, Soumya Kanti Ghosh, is at odds with the predictions made by Indian authorities, who had estimated a more conservative growth rate of 6.5 percent for the fiscal year 2023-24. The government and the Reserve Bank of India (RBI) had both aligned with the latter forecast. However, Ghosh’s analysis suggests that the economy might exceed these expectations by achieving a growth rate of 6.7 percent for the entirety of 2023-24.
Ghosh attributes this optimistic forecast to various factors, including a substantial increase in capital expenditure by both the central government and individual states during the first quarter of the fiscal year. Additionally, the economist highlights encouraging signs of growth in corporate results. During the April-June period, Indian companies reportedly recorded a profit after tax (PAT) of over 30 percent. Notably, corporate margins, which had been under pressure for several quarters, have shown signs of improvement since the last quarter of 2023. The SBI economist emphasized that the EBIDTA margin of more than 3,000 aggregated companies saw a noteworthy improvement of 274 basis points, rising to 15.81 percent in the first quarter of the fiscal year 2023-24.
While SBI’s projections differ from official estimates, the central bank’s predictions are not entirely pessimistic. The RBI had estimated a potential rise in GDP growth from 6.1 percent in January-March to 8 percent in April-June, with a full-year growth projection of 6.5 percent.
Conclusion
The eagerly awaited GDP data for April-June is scheduled for release on August 31, offering a clearer perspective on the country’s economic performance during this crucial period. As the data becomes available, economists and market observers will closely analyze the figures to gauge the accuracy of the projections made by SBI and other institutions.
