FY17 GDP Growth Expected To Be Revised From 7.1 To 7.6 Per Cent: SBI Ecoflash Report

Gross Domestic Product (GDP) numbers for quarter (Q) 4, which are to be released on 31 May, will be a pleasant surprise, State Bank Of India’s latest Ecoflash report has noted, adding that the new Index of Industrial Production (IIP) and Wholesale Price Index (WPI) series will impact all GDP numbers from FY14.

According to the report, Q4 could see a GDP growth of 7.2 per cent. There could be an upward revision in the GDP numbers of all the three preceding quarters - Q1, Q2 and Q3 - by 40, 60 and 40 basis points, respectively to 7.6, 8.0 and 7.4 per cent. FY17 GDP growth is expected to be revised from 7.1 to 7.6 per cent.

As the new IIP and WPI series will affect GDP numbers from FY14, the bank expects FY14 GDP growth to be revised from 6.5 per cent to 7.3 per cent while FY16 GDP is expected to be revised from 7.9 per cent to 8.3 per cent.

As per the report, there is a significant decline in correlation between the new IIP and the old IIP post FY15. The level of remonetisation has reached 80 per cent of the total extinguished currency in circulation as on 19 May.

“We also estimate that nearly 65 per cent of incremental deposits of Rs 7 lakh crores that came into the system between 8 November 2016 and 12 May 2017 is still sloshing around,” the report reads.

The report also states that a better GDP number, abundant liquidity and very soft inflation numbers will make monetary management difficult.