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MOSL: ECOSCOPE: Strong investments drive GDP growth above 7%

ECOSCOPE: Strong investments drive GDP growth above 7%; Our theme of consumption-driven to investment-led GDP growth playing out

 

• Real GDP growth came in at 7.2% YoY in 3QFY18, higher than our/consensus estimate of 6.7%/7% and up from 6.5% YoY in 2QFY18. While investments surged 13% YoY, consumption growth slowed down to 5.6% YoY.
• Real GVA growth also improved to 6.7% YoY, exactly in line with market consensus, but higher than our estimate of 6.5%. We note that better agriculture, manufacturing and construction activities pushed real GVA growth higher.
• Overall, it appears that the much-needed twin transition – (i) ‘consumption-driven to investment-led’ GDP growth and (ii) the private (households + corporate) sector taking the mantle from the government in driving investment growth – that we have been talking about over the last two years is materializing.
• Importantly, the share of investments has increased from 29.7% of GDP in 3QFY17 to 30.7% in 3QFY18 (Exhibit 8), after declining over the last three years. However, gross domestic (implied) savings have actually declined marginally from 27% of GDP in 3QFY17 to 26.8% in 3QFY18.
• We expect real GVA/GDP growth to improve to 7%/7.3% in 4QFY18 on account of a weak base. Our full-year FY18 GVA/GDP growth estimates have been revised up to 6.4%/6.7% (as against 7.1% in FY17) from 6.2%/6.5% earlier, reflecting the slight upward revision in 2QFY18 numbers as well as better-than-expected 3QFY18 data.