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MOSL: ECOSCOPE-India’s economic activity growth stable in Dec’19; Expect real GVA/GDP growth to bottom out at ~4% in 3QFY20

ECOSCOPE: India’s economic activity growth stable in Dec’19; Expect real GVA/GDP growth to bottom out at ~4% in 3QFY20

 

• Our in-house Economic Activity Index (EAI) for India's real GVA (called EAI-GVA) suggests that economic growth was at 5-month high of 5.4% YoY in Dec'19, similar to that in Nov'19 but much better compared to Sep-Oct'19. Non-farm EAI-GVA growth was ~6% YoY in Nov-Dec'19, compared to 2% in Oct'19.
• EAI-GDP growth, however, weakened from 6% YoY a month ago (and 6.7% a year ago) to 5% YoY in Dec'19, driven primarily by lower contribution from the external sector. Consumption activity, supported by strong fiscal spending, continued to grow decently, while investments declined at 5-month low pace in Dec'19.
• Overall, although EAI growth picked up in Nov-Dec'19, record-low growth in Oct'19 suggests that EAI-GVA grew at a slow pace of ~4% in 3QFY20, compared to 4.5% growth in 2QFY20. Nevertheless, since FY19 real GDP growth has been revised down from 6.8% earlier to 6.1% now, the quarterly numbers (from 1QFY19 to 2QFY20) will be updated with 3QFY20 data on 28th Feb'20. Therefore, while 1HFY20 may be revised upwards, our EAI estimates suggest that growth is likely to have bottomed out in 3QFY20.