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MOSL: Morning India (06/March/19): 1. EcoScope (EAI: An active new year); 2. Financials – Housing Finance (Increasing capital requirements for HFCs); 3. Cummins India

MOrning India (06/March/19): 1. EcoScope (EAI: An active new year); 2. Financials – Housing Finance (Increasing capital requirements for HFCs); 3. Cummins India (Focus on developing new growth areas, market share)

 

Today’s top research idea

EcoScope – EAI: An active new year; Our in-house economic activity index hits seven-month high of ~9%

• Our in-house Economic Activity Index (EAI) for India's real GDP (called EAI-GDP) has started the year on a strong note with seven-month highest growth of 8.9% YoY in Jan'19 vis-à-vis average growth of ~6% in the past six months.
• The acceleration was entirely driven by 20-month highest growth of 10.7% YoY in consumption, which was primarily supported by ~50% YoY increase in fiscal spending. Investments, on the other hand, were subdued, growing at sub-2% YoY for the third consecutive month.
• EAI-GVA index also grew at the three-month highest pace of 7.6% YoY in Jan'19, better than 6.6% in the last two months of 2018. Broad-based improvement pushed GVA growth higher.
• Overall, although better growth in Jan'19 was almost entirely driven by fiscal spending, it still comes in as a surprise, considering the absence of any favorable base. We forecast real GDP growth of 6.0-6.5% in 4QFY19, implying 6.9-7.0% growth for full-year FY19. However, the strong reading of Jan'19 indicates an upside risk to our forecast.

Piping hot news

India may impose retaliatory tariffs on US goods from April 1

• India is likely to impose higher duties on 29 goods imported from the US from April 1, adopting a firmer stance in relations with one of its biggest trading partners, which withdrew benefits under the Generalised System of Preferences (GSP). The decision could derail the substantive package that India and the US were working on to resolve trade issues.