Report
Nikhil Gupta
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MOSL: ECOSCOPE | EAI-Fiscal spending supports EAI growth in Feb’19

ECOSCOPE | EAI: Fiscal spending supports EAI growth in Feb’19; Spending cuts could lower EAI growth to 2-3% in Mar’19

 

  • Our in-house Economic Activity Index (EAI) for India’s real GDP (EAI-GDP) moved up by 6.6% YoY in Feb’19, following strong growth of ~8% in the previous month. While EAI growth has weakened vis-à-vis Jan’19, average growth of 7.3% in Jan-Feb’19 – similar to that in Jan-Feb’18 – is much better than expected.
  • The deceleration in EAI growth can entirely be attributed to three-month slowest growth of 6.7% YoY in consumption, which was again primarily supported by ~18% YoY increase in fiscal spending. Investments, on the other hand, were subdued, growing at sub-2% YoY for the fourth successive month.
  • EAI-GVA index, however, grew at the four-month highest pace of 8.3% YoY in Feb’19, better than 7.7% in the previous month. Average growth of 8% in Jan-Feb’19 – albeit strong – is lower than 8.5% in Jan-Feb’18.
  • Although fiscal spending has driven better-than-expected growth in Jan-Feb’19, we believe that spending cuts in Mar’19 (to meet deficit targets) could lower EAI growth to 2-3%. Accordingly, we forecast real GDP growth of ~6.5% in 4QFY19 (similar to 6.6% in 3QFY19), implying ~7.0% growth for full-year FY19.
Provider
Motilal Oswal
Motilal Oswal

​Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance. 

Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.

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Nikhil Gupta

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