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MOSL: ECOSCOPE-A reasonably decent start to 2018 for the Indian economy

ECOSCOPE: A reasonably decent start to 2018 for the Indian economy; Fiscal tightness leads to three-month slowest growth in economic activity

 

• The Indian economy began 2018 reasonably well, with the monthly economic activity index (EAI) growing 6.3% YoY in January. Although it was slowest growth in three months, a continued surge in investments is highly encouraging.
• Consumption and foreign trade were a drag on January EAI. This, however, was partly offset by investments, which grew at the 79-month highest pace of 16.9% YoY, driven by a favorable base effect in construction, commercial auto sales, diesel sales and cargo freight traffic.
• A double-digit decline in fiscal spending pulled consumption index growth to a three-month slowest level of 5.9% YoY. However, private consumption continued to grow strongly.
• Overall, while fiscal spending is expected to remain subdued in 4QFY18, strong investments and private consumption - partly due to a favorable base - are expected to support EAI. Accordingly, we expect real GDP growth to improve slightly from 7.2% in 3QFY18 to 7.3% in 4QFY18, implying full-year FY18 growth of 6.7%, as against 7.1% in FY17.