India’s GDP likely contracted 10.7% in the second quarter, with a further recovery likely in the third quarter, SBI Research said in a report released on Thursday, citing improvements in economic indicators over October and November. “After witnessing a decline of 23.9% in real GDP in Q1 FY21, we expect Q2 GDP growth at -10.7% (earlier: -12.5%) with positive bias, based on our ‘Nowcasting’ model with 41 high frequency indicators, associated with industry activity, service activity, and global economy,” SBI Group chief economic adviser Soumya Kanti Ghosh wrote in the research report. “The SBI business activity index also shows that there is continuous improvement and Q3 numbers could be even better. However, the extent of recovery in subsequent quarters can only be gauged after the actual Q2 numbers are published,” Mr. Ghosh added. Moderate growthThe yearly SBI Composite Index reached a 19-month high of 53.9 (reflecting moderate growth) this month, compared to 53 in October. The monthly index has touched an all-time high of 62.1 (reflecting high growth) in November, from 59.3 in October, the report’s author pointed out. GST collections to rise Based on this, SBI projected that the index of industrial production (IIP) and manufacturing sector output may grow by 2-3% in October 2020 and 3.5-4.5% in November. Goods and Services Tax collections were expected to improve further in November. “We project November GST collections at a 10-month high of ₹1.08 lakh crore as compared to ₹1.05 lakh crore in October. The excellent improvement in GST is mainly due to traction in economic activities and services in festive month of November,” Mr. Ghosh said.
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