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MOSL: ECOSCOPE | A subdued start to 2020-Economic activity growth at three-month low in Jan’20

ECOSCOPE | A subdued start to 2020; Economic activity growth at three-month low in Jan’20

 

• Our in-house Economic Activity Index (EAI) for India's real GVA (called EAI-GVA) suggests that economic growth weakened from ~6% YoY in Nov/Dec'19 to 5.1% YoY in Jan'20 - lowest in past three months. The deceleration can be attributed to a high base and a weak services sector led by a decline in fiscal spending.
• EAI-GDP growth also came in at a 10-month low of 2.4% YoY in Jan'20, as against average growth of 5% YoY in 2HCY19. Although investments are expected to have grown for the first time in eight months in Jan'20, weak consumption activity led by fiscal spending dragged EAI-GDP growth.
• Overall, while 2020 was expected to begin well led by 7-8 year high PMI indices, actual data confirm that economic growth was at a three-month low in Jan'20. Further, since fiscal spending is expected to remain weak in Feb-Mar'20 as the government attempts to meet its FY20RE deficit target, a recovery in 4QFY20 appears difficult. Consequently, we believe that real GDP growth would be ~4.5% in 4QFY20 - similar to 4.7% in 3QFY20, implying ~5% growth in FY20.