IGI Logo

Expect 2QFY23 real GDP growth to be at 5-5.5% YoY

* Preliminary estimates indicate India’s EAI for GVA grew at a four-month low rate of 7.3% YoY in Jul’22 v/s 13.2%/10.2% YoY in Jun’22/Jul’21, respectively. This was due to a four-month low growth in non-farm sector led by both industrial and services activities. The farm sector, on the other hand, performed well in Jul’22 vis-à-vis Jun’22.

*  On the contrary, EAI-GDP contracted 2.8% YoY in Jul’22 – its first contraction in 17 months. This was owing to a negative 9.5pp contribution by net exports, as real imports grew ~35% YoY during the month while real exports declined ~4% YoY.

* Total consumption posted a 13-month low growth of 3.7% YoY (v/s 8.3% YoY in Jun’22), because of a sharp decline in fiscal spending and weak petrol sales. Excluding fiscal spending, private consumption rose 4.5% YoY in Jul’22. Investments grew lower at 12.1% YoY in Jul’22 v/s 23% YoY in 1QFY23, led by weak power generation, construction activity and diesel sales

* A monthly analysis of indicators for Aug’22 denotes a mixed bag. Some indicators such as currency in circulation, Vahaan registrations and Google mobility have done well, while others like PMI manufacturing, toll collections, FX reserves and power generation have decelerated in Aug’22.

* Overall, our in-house estimates suggest that, the economic activity growth ebbed in Jul’22. Further, progress of economic activity in Aug’22 also looks bleak. These estimates suggest that real GDP growth could be 5-5.5% in 2QFY23, lower than market consensus of 6.3% but higher than RBI’s forecast of 4.1% YoY.

EAI-GVA grew at four-month low rate of 7.3% YoY in Jul’22…: Preliminary estimates indicate India’s EAI for GVA posted a four-month low growth rate of 7.3% YoY in Jul’22 as against 13.2%/10.2% YoY in Jun’22/Jul’21, respectively. The weakness was because of a deceleration in industrial and services activities, which led to 7.9% YoY growth in non-farm EAI-GVA v/s 14.5%/10.7% YoY in Jun’22/Jul’21, respectively (Exhibits 1, 2)

…while EAI-GDP, contracted due to worsening external trade: EAI-GDP declined for the first time in 17 months by 2.8% YoY in Jul’22 as against +5.5%/7.8% YoY in Jun’22/Jul’21, respectively. This was owing to a negative 9.5pp contribution by net exports, as real imports grew ~35% YoY during the month while real exports declined ~4% YoY. Additionally, both consumption and investments also decelerated during the month (Exhibits 3, 4).

To Read Complete Report & Disclaimer Click Here

For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html SEBI Registration number is INH000000412

Above views are of the author and not of the website kindly read disclaimer