State Bank of India (SBI) Economic report

• The GDP growth for the October­-December quarter is estimated to be 4.5%, according to a State Bank of India (SBI) report.
• For the full year, the projection has been revised upwards to 4.7% from 4.6%.
• The economy grew by 5% in the first quarter and 4.5% in the second quarter — the lowest in 26 quarters
• Our composite leading indicator (index of 33 major leading indicators) suggests that GDP growth will remain flat at 4.5% in Q3 of FY20, the report, authored by Soumya Kanti Ghosh, group chief economic adviser, SBI, said. The government is scheduled to release Q3 GDP data by the end of this week. 
• “Trade policy uncertainty, geopolitical tensions, and idiosyncratic stress in key emerging market economies continued to weigh on global economic activity — especially manufacturing and trade. Considering all these factors, we now foresee a GDP growth at 4.7% in current fiscal,” the report said. 

Global slowdown

• The report pointed out that the growth rate in FY20 should be looked at through the prism of the synchronized global slowdown, and India cannot be isolated. 
• There is worry that the impact of COVID­19on India could occur with a lag and the outbreak was now expected to cause a growth erosion of 100 basis points in China alone, it said adding new hotspots had emerged in South Korea and in Italy and these will result in more quarantines, border closures and disruptions in economic relations. 
• “Thus, the cost of death, even though it might be limited, the economic impact could be significantly large,” the report said.
• Commenting that the monetary policy was not enough in the current circumstances to revive growth, the report observed low-interest-rate does not guarantee a rise in demand for investment as it is the future expectation that drives investment decisions rather than cost. 

Source: The Hindu