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MOSL: ECOSCOPE | EAI-An active new year-Our in-house economic activity index hits seven-month high of ~9%

ECOSCOPE | EAI: An active new year; Our in-house economic activity index hits seven-month high of ~9%

 

• Our in-house Economic Activity Index (EAI) for India's real GDP (called EAI-GDP) has started the year on a strong note with seven-month highest growth of 8.9% YoY in Jan'19 vis-à-vis average growth of ~6% in the past six months.
• The acceleration was entirely driven by 20-month highest growth of 10.7% YoY in consumption, which was primarily supported by ~50% YoY increase in fiscal spending. Investments, on the other hand, were subdued, growing at sub-2% YoY for the third consecutive month.
• EAI-GVA index also grew at the three-month highest pace of 7.6% YoY in Jan'19, better than 6.6% in the last two months of 2018. Broad-based improvement pushed GVA growth higher.
• Overall, although better growth in Jan'19 was almost entirely driven by fiscal spending, it still comes in as a surprise, considering the absence of any favorable base. We forecast real GDP growth of 6.0-6.5% in 4QFY19, implying 6.9-7.0% growth for full-year FY19. However, the strong reading of Jan'19 indicates an upside risk to our forecast.