Q3 '17 GDP estimate likely to be less than 6%: SBI report

MUMBAI: The growth estimate in the country’s economic output or gross domestic product ( GDP) may be scaled down to less than 6% for the FY’17 as the impact of demonetisation hurt consumption and output, says a report by State Bank of India’s research team. But FY’18 growth could move up faster if demand comes back faster post remonetisation.

“We estimate that Q3’17 GDP growth will be at 5.8% and Q4 it will recover to 6.4%. For FY17, we believe GDP growth will recover to 6.4%.” said the SBI research report.

The SBI report attributes the downward revision of growth estimate to demonetisation which will have short-term negative impact on growth numbers though in the long-run growth will increase as formalisation of economy increases and remonetisation happens at a faster pace.

If one went by current estimates of the Cental Statistical Organisation or CSO of 7.1% (FY17), the Q3 and Q4 GDP growth would be around 6.1% and 7.8%, respectively, which is quite difficultto achieve given the extent of liquidity shock that has led to a drastic consumer spending shock.

CSO is going to release Q3 F17 GDP estimate on 28th Feb’17. The Q3 estimates will be very critical as they cover the two month period of demonetisation and might give us the glimpses of what happened in the economy during those two months.

GDP growth estimate of 7.1% GDP estimate by CSO implies a 7.8% GDP growth or Q4FY17.Perhaps for the first time CSO will revise downwards the estimates for FY17 on Feb 28 itself (instead of May 2017), the SBI report said.