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MOSL: ECOSCOPE-Economic activity weakens further in Jun’19; Expect 1QFY20 GDP growth to bottom out at ~5.6%

ECOSCOPE: Economic activity weakens further in Jun’19; Expect 1QFY20 GDP growth to bottom out at ~5.6%

 

• Our in-house Economic Activity Index (EAI) for India's real GDP (called EAI-GDP) suggests 3-month slowest growth of 2.9% YoY in Jun'19, implying that economic activity grew 4.2% YoY in 1QFY20, similar to that in 4QFY19. The deceleration in EAI-GDP in Jun'19 was broad-based - while consumption posted its weakest growth in three months, investments declined for the first time in four months (and fastest pace in 28 months).
• EAI-GVA index also posted slower growth of 4.5% in Jun'19, implying 2-year slowest growth of 5.5% YoY in 1QFY20. The weaker growth was led by almost stagnant agricultural activity and slower non-agricultural sector. Manufacturing sector grew at 7-month slowest pace, while services growth was the weakest in three months.
• Overall, our analysis suggests that India's economic activity weakened further in 1QFY20, with very weak growth in fiscal spending contributing to it. We believe that real GDP growth could decelerate slightly from 5.8% YoY in 4QFY19 to ~5.6% in 1QFY20. We expect 1QFY20 to be the bottom for GDP growth; hereon it is expected to start reviving and cross 7% in 4QFY20. Accordingly, we project real GDP to grow at ~6.5% in FY20, lower than 6.8% in FY19.