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MOSL: ECOSCOPE: Economic activity slows in Sep’21; Expect real GDP growth at 8–9% YoY in 2QFY22

ECOSCOPE: Economic activity slows in Sep’21; Expect real GDP growth at 8–9% YoY in 2QFY22

 

• Our in-house Economic Activity Index (EAI) for India’s real GVA (called EAI-GVA) grew at the seven-month slowest pace of 5.4% YoY in Sep’21, after posting 10–12% YoY growth in Jul/Aug’21. This implies EAI-GVA growth of 9.2% YoY in 2QFY22, following all-time high growth of 20.3% YoY in 1QFY22. Modest growth in the Farm and Non-Farm sectors led to lower GVA growth last quarter.
• Similar to EAI-GVA, EAI-GDP also grew at just 2.2% YoY in Sep’21, compared with 8.7%/13.3% YoY in Jul/Aug’21. This led to growth of 8% YoY in 2QFY22, against 20.4% YoY in 1QFY22. This was driven by moderation in investment and consumption activity during the quarter.
• Total consumption remained stable at ~10% on account of 61.8% YoY growth in government spending in Sep’21. Private consumption, in fact, grew at the three-month slowest pace of 6.3% YoY in Sep’21. Total investments rose at a slower pace at 8.7% YoY, supported by government spending growth of 83.1% YoY during the month.
• Additionally, a monthly analysis of certain indicators for Oct’21 suggests improvement in economic activity. All of the indicators – PMI manufacturing, toll collections, e-way/vahaan registrations, mobility indicators, external trade, and power generation – appear favorable in Oct’21.
• Overall, our in-house estimates suggest India’s real GVA/GDP growth came in at 8–9% YoY in 2QFY22, marginally higher than our . Looking at our EAI estimates, we believe growth in 2QFY22 was largely supported by massive government spending (consumption and investments) during the quarter.