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MOSL: ECOSCOPE | Economic activity growth at new low in Oct’19-Expect real GDP growth to weaken further in 3QFY20

ECOSCOPE | Economic activity growth at new low in Oct’19; Expect real GDP growth to weaken further in 3QFY20

 

• Our in-house Economic Activity Index (EAI) for India's real GVA (called EAI-GVA) suggests that economic growth weakened to 1.7% YoY in Oct'19, marking a new low since the series began in Apr'11. The weakness was again broad-based as non-farm GVA growth was at record low of only 2.0% in Oct'19.
• EAI-GDP, however, grew 5.2% YoY in Oct'19 - better than 3% a month ago but weaker than 6.2% a year ago - driven primarily by the third consecutive double-digit decline in investments. Consumption activity, on the other hand, posted decent growth of 7.1%, majorly supported by fiscal spending as private consumption remained muted.
• Overall, despite being the festive season, economic activity in Oct'19 was the weakest in the current cycle. Although it was partly led by the high base, it raises serious doubts over the bottoming out of real GVA/GDP growth in 2QFY20. Consequently, we expect real GDP/GVA growth to weaken further in 3QFY20, which will mark the trough in the current economic slowdown. The revival in 2HFY20, thus, would be only marginal. Real GVA/GDP growth could be closer to 4.5% in FY20 as compared to 6.8% in FY19.