New Delhi, Nov 20 (IANS): India's Q2FY21 GDP contraction is expected to come in at (-)10.7 per cent, an SBI Ecowrap report said on Friday. An earlier Ecowrap report had estimated GDP for Q2FY21 at (-)12.5 per cent.

"We are also revising our Q2 GDP growth to (-)10.7 per cent (from the earlier (-)12.5 per cent) with positive bias, based on our nowcasting model with 41 high frequency indicators, associated with industry activity, service activity and global economy," the SBI Ecowrap report said.

"Our estimate of Q2FY21 (or Q32020) is aligned with the economic growth seen by various economies in Q32020. The GDP contraction halved in Q32020 compared to Q22020 for select 18 economies," it added.

According to the report, the upward revisions reflect faster recovery and these estimates would have been even better had July and August shown even a little bit of traction.

"The SBI business activity index shows that there is continuous improvement and Q3 numbers could be even better. However, the extent of recovery in the subsequent quarters can only be gauged after the actual Q2 numbers are published. There is no doubt that the economy has suffered.

"The MSME sector has borne the brunt of the Covid pandemic and the ECLGS scheme was a shot in the arm. Future prognosis will depend on two things - the shape of the recovery from Covid infections and how fast the vaccine is rolled out," the report said.

In addition, the report said the current trends of Covid-19 infection shows that cases in India peaked in September.

"With Unlock 5.0 and festival season till December end, the chances of a possible second wave will increase. The fortnight post Diwali will be crucial and we need to carefully monitor the situation," the report said.

"With domestic vaccine entering Phase III and one more phase to go, Covid-19 recovery will be contingent on how fast the vaccine is rolled out and consumer confidence is restored. The best estimate of full recovery in consumer confidence can be placed in Q3 FY22," it added.