MOSL: ECOSCOPE-1QFY18 real GDP growth slips below 6%-Continue to expect growth at sub-7% in FY18

​ECOSCOPE: 1QFY18 real GDP growth slips below 6%; Continue to expect growth at sub-7% in FY18

In contrast to our expectation of 6.4% (and market consensus of ~6.5%), real GDP growth eased to its fresh three-year low of 5.7% YoY in 1QFY18.

Lower-than-expected growth can be ascribed to a significant miss on private consumption growth (6.7% v/s our estimate of 7.8%). Adjusting for this negative surprise, real GDP growth was in line with our estimates.

Finally, valuables grew significantly, contributing 2.4pp to GDP growth. However, it is important to interpret this surge in valuables with caution because imports are deducted from GDP. Thus, the contribution of valuables is entirely offset by higher net imports.

Overall, it appears like our theme of 'consumption-driven to investment-led' is finally playing out. With private consumption slowing and no revival in investments, real GDP growth is bound to fall below 7% in FY18.

We expect real GDP to grow by 6.5% in 2QFY18, followed by 7% and 7.5% in the subsequent two quarters. For full-year FY18, we expect growth to decline to 6.7% from 7.1% in FY17.