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Expect 2QFY23 real GDP to grow 6.5-7% YoY

* Preliminary estimates indicate that India’s EAI for GVA posted a three-month growth of 9.2% YoY in Sep’22, driven by broad-based, faster growth in farm as well as non-farm sectors. EAI-GVA grew 7.7% YoY in 2QFY23 (v/s 12.8/8.8% YoY in 1QFY23/2QFY22).

* After contracting for two consecutive months, EAI-GDP grew at a four-month high of 9.5% YoY in Sep’22, led by higher total consumptions and investments during the month. Owing to the decline in the first two months of 2QFY23, EAI-GDP grew at only 1.6% YoY (v/s 10/6.8% in 1QFY23/2QFY22). Total consumption grew 7% YoY in Sep’22, led by strong growth in auto sales and higher expected growth in IIP non-durable consumer goods. Moreover, fiscal consumption grew at a six-month high of 43% YoY in Sep’22. Private consumption grew 4.4% YoY during the month as against 3.5% YoY a month ago. Notably, total investments grew sharply by 18% YoY in Sep’22 – a three-month high, on account of better growth in all indicators, including accelerated government capex spending.

* A monthly analysis of indicators for Oct’22 denotes a mixed signal. While a few of them–toll collections, and power generation– slowed significantly vis-à-vis Sep’22, others such as PMI manufacturing, vahaan registration, and Google mobility partly offset the slowdown.

* Overall, contrary to our expectations of weakness in Sep’22, our in-house estimates now suggest that it performed better. Consequently, EAI-GVA and EAI-GDP posted slightly stronger-than-expected growth in 2QFY23. Therefore, we continue to expect real GDP growth at ~6.5% YoY in 2QFY23, with a possible upward bias.

* EAI-GVA grew 9.2%/7.7% YoY in Sep’22/2QFY23…: Preliminary estimates indicate that India’s EAI for GVA posted a three-month high growth of 9.2% YoY in Sep’22 (v/s 7.1/6.6% YoY in Jul’22/Aug’22). This was due to broad-based faster growth in farm as well as non-farm sectors. Accordingly, EAI-GVA grew 7.7% YoY in 2QFY23 (v/s 12.8/8.8% YoY in 1QFY23/2QFY22). (Exhibits 1, 2).

* …and EAI-GDP rose 9.5%/1.6% YoY in Sep’22/2QFY23: After contracting for two consecutive months, EAI-GDP grew at a four-month high rate of 9.5% YoY in Sep’22 (v/s -2.8/-1.4% YoY in Jul’22/Aug’22). This was led by higher total consumption and investments during the month. Owing to the decline witnessed in the first two months of 2QFY23, EAI-GDP grew in low at only 1.6% YoY (v/s 10/6.8% in 1QFY23/2QFY22). (Exhibits 3, 4).

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