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MOSL: ECOSCOPE-Economic activity growth weakens sharply in Nov’18

ECOSCOPE: Economic activity growth weakens sharply in Nov’18; Expect real GDP growth to weaken ~6.5% in 3QFY19

 

• Our in-house Economic Activity Index (EAI) for India’s real GDP (called EAI-GDP) shows a growth of 3.5% YoY in Nov’18, partly due to the fading of the favorable base. EAI-GDP growth averaged 5.1% in Oct-Nov’18, much lower than 6.5% in 2QFY19.
• The month-on-month (MoM) deceleration in our EAI-GDP was broad-based. Sharp decline in fiscal spending led to 20-month slowest growth in consumption, while fading of favorable base was responsible for the 13-month weakest growth (of 4.5% YoY) in investment spending.
• Like EAI-GDP, our EAI-GVA index also grew at 6-month slowest pace of 6.8% YoY in Nov’18, weaker than 9.2% in Oct’18. Weaker GVA growth was driven by 13-month slowest growth in the manufacturing sector.
• Overall, weaker growth in Nov’18 in our in-house EAI was on expected lines as the favorable base has faded. As stated , we expect real GDP growth to weaken further towards ~6.5% in 3QFY19, implying ~7% growth in FY19, lower than the market consensus and the RBI’s projection of ~7.4%.