MOSL: ECOSCOPE-2QFY18 real GDP growth in line with estimate-Farm sector weakness to bring GVA growth to sub-6% in 3QFY18

​ECOSCOPE: 2QFY18 real GDP growth in line with estimate; Farm sector weakness to bring GVA growth to sub-6% in 3QFY18

• Real GDP growth picked up to 6.3% YoY in 2QFY18, in line with our estimate of 6.4% and up from its three-year low of 5.7% YoY in 1QFY18. Our theme of 'consumption-driven to investment-led' is finally playing out, as consumption grew at the slowest pace in two years, while investments grew at the fastest pace in five quarters.
  
• Real GVA growth of 6.1% YoY too was in line with our estimate of 6.2% and much better than 5.6% growth in the previous two quarters, primarily led by higher manufacturing growth (7% v/s 1.2% in 1QFY18), which entirely offset the weakness in services (+7.1% YoY in 2QFY18 v/s 8.7% in 1QFY18).
  
• According to the first advance estimates of the Department of Agriculture released in late Sep'17, notwithstanding normal monsoon, food grains production in the Kharif season is estimated to have declined 2.8% in FY18, marking the sharpest contraction in eight years. Consequently, we have revised down our forecasts for agricultural activities.
  
• Accordingly, we expect real GVA growth to fall below 6% YoY again in 3QFY18 before picking up to ~6.5% in 4QFY18. This implies real GVA growth of 6.0% for the full-year FY18, down from our earlier estimate of 6.4%. It also means that real GDP is likely to grow 6.3% in FY18, down from our earlier estimate of 6.7%.