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MOSL: ECOSCOPE-Why real GDP growth could be about 6% in 4QFY17? Upward revision due to new IIP would be concentrated in 1HFY17

​ECOSCOPE: Why real GDP growth could be about 6% in 4QFY17? Upward revision due to new IIP would be concentrated in 1HFY17

• Irrespective of the new IIP (index of industrial production) series (2011-12 base), which is a key ingredient in quarterly GDP estimates and shows much higher growth than the old IIP series (2004-05 base), we continue believing that real GVA/GDP growth (2011-12 base) will likely be ~6% YoY in 4QFY17, much lower than in previous quarters.
  
• Real GVA growth for 1HFY17, however, is likely to be revised upward to 7.3%, as against 6.8% estimated previously. Consequently, real GVA growth for full-year FY17 may be revised from previously estimated 6.4% to 6.8%, while it could be broadly unchanged for FY16. Real GDP accordingly could post growth of 7.2% in FY17 – higher than our earlier estimate of 6.8%.
  
• As far as the impact on our monthly economic activity index (EAI) is concerned, which has very strong correlation with real GDP growth excluding discrepancies, we find that while economic activity grew faster than previously estimated in FY17, it was broadly similar in FY16. Nevertheless, the revised EAI also witnesses strong deceleration in 4QFY17.