India’s economy is expected to register GDP growth of just 5.8% in the second quarter of this year, economists at the State Bank of India (SBI) estimated in a report. This is less than half of the 13.5% increase recorded during the April-June quarter.

Last week, economists at Bank of Baroda and ratings agencies such as Crisil and ICRA had forecast growth of 6.5% in the July-September quarter. The Office for National Statistics will release its estimates of the economy’s performance in Q2 on Wednesday.

“There is a wide divergence in the market consensus regarding Q2 GDP numbers. Consensus estimates are 6.1%,” noted the author, the group’s chief economic adviser Soumya Kanti Ghosh, in the report. .

The bank’s nowcasting model, which uses 30 high-frequency indicators and artificial neural networks based on machine learning, pegs GDP growth for the second quarter at 5.8%. Economic activity, she said, had declined between June and September 2022, but increased in October, so the bank expressed more optimism about growth prospects in the current third quarter.

“Manufacturing growth in the second quarter will likely be weak due to margin compression,” SBI said, pointing to a 14% year-over-year decline in earnings before interest, depreciation, taxes, amortization ( EBIDTA) during the quarter among companies outside the banking and financial services space. “Furthermore, corporate margins appear to be under pressure, as evidenced by the results of around 3,000 ex-BFSI listed entities, due to higher production costs,” he said.

Mr Ghosh, however, pointed out that there has been “kind of a big disconnect between leading indicators and GDP growth” since the start of the pandemic. “Growth impulses continue to be strong and it might be best to look at the GDP numbers for a few quarters before coming to a definitive conclusion on the growth trajectory,” he concluded.