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MOSL: ECOSCOPE: Economic activity strengthens in Jul’19; GDP growth estimated at ~6% YoY for 2QFY20

ECOSCOPE: Economic activity strengthens in Jul’19; GDP growth estimated at ~6% YoY for 2QFY20

 

• Our in-house Economic Activity Index (EAI) for India's real GDP (called EAI-GDP) suggests six-month highest growth of 7.5% YoY in Jul'19, supported by seven-month-high growth in investments and three-month-high growth in consumption. We note that higher fiscal spending, better construction activity, faster growth in cargo traffic and expected growth in IIP for capital goods offset the record decline in auto sales.
• EAI-GVA index also grew at 6.2% YoY in the month, better than 4.4% in Jun'19. Non-farm economy led by five-month highest growth in the services sector (driven by banking activities, fiscal spending and freight traffic) and better industrial growth (driven by construction activity) were the key drivers of the acceleration in Jul'19.
• Overall, although the auto sector contracted sharply in Jul'19, other leading indicators suggest that economic activity grew at a faster pace compared to the previous few months. We believe that real GDP growth has bottomed out at 5% YoY in and will likely to improve toward 6% YoY in 2Q and 3QFY20. Accordingly, we project real GDP to grow at ~6% in FY20, lower than 6.8% in FY19.