The Economy Observer : EAI - Monthly Dashboard: Economic activity slowed in Jan`25 - Motilal Oswal Financial Services Ltd
Expect real GVA growth at 6.0-6.2% in 4QFY25
* Preliminary estimates indicate that India's EAI-GVA growth decelerated sharply to a 27-month low of 4.5% YoY in Jan’25 vs. 5.4%/8.3% in Dec’24/Jan’24. The deceleration was primarily due to a 27-month low growth in the services sector. Conversely, growth in the agriculture and industrial sectors remained robust.
* EAI-GDP growth came down to 3.7% YoY in Jan’25 from 4.2% YoY in Dec’24 (vs. 3.3% YoY in Jan’24). The deceleration was primarily attributed to negative contribution from external trade. External trade subtracted 2.2pp from EAI-GDP growth in Jan’25 vs. 1.2pp subtraction in Dec’24. On the other hand, consumption grew at a three-month high pace of 6.8% in Jan’25 vs. 5.5% in Dec’24. Additionally, investment growth accelerated to 6.2% in Jan’25 from 5.9% in Dec’24. Excluding fiscal spending, EAI-GDP grew 2.6% YoY in Jan’25 vs. 4.1% growth in Dec’24.
* Selected high-frequency indicators (HFIs) portray a mixed picture for economic activity in Feb’25. Toll collections surged at a 25-month high pace of 22.9% in Feb’25; PV sales rose in double digits, albeit lower than Jan’25; power generation grew at an eight-month high pace of 6.7%; and PMIs remained resilient. On the other hand, vahan registrations contracted 7.3% in Feb’25 and CV sales grew at a three-month low rate of 1.3%.
* Real GDP growth improved in 3QFY25, printing at 6.2% (vs. our forecast of 5.7%) after dipping shockingly to a seven-quarter low of 5.6% in 2QFY25. Our in-house models suggest that economic growth decelerated in Jan’25, with EAI-GVA printing at 4.5% (lowest growth in 27 months). Additionally, HFIs portray a mixed picture for economic activity in Feb’25. CSO projects a real GVA growth of 6.8% in 4QFY25 (with FY25 growth at 6.4%), which is difficult to achieve considering a high base of 7.3% in 4QFY24. Therefore, we believe that India’s real GVA could grow in the range of 6.0-6.2% YoY in 4QFY25 (with FY25 growth at ~6.0-6.2%), much lower than the official forecast of 6.8%.
* EAI-GVA growth at 27-month low in Jan’25: Preliminary estimates indicate that India's EAI-GVA growth decelerated sharply to a 27-month low of 4.5% YoY in Jan’25 vs. 5.4%/8.3% in Dec’24/Jan’24. The deceleration was primarily due to a 27-month low growth in the services sector. Conversely, growth in the agriculture and industrial sectors remained robust. (Exhibits 1 and 2)
* EAI-GDP growth decelerated to 3.7% in Jan’25: EAI-GDP growth came down to 3.7% YoY in Jan’25 from 4.2%3.3% YoY in Dec’24 (vs. 3.3% YoY in Jan’24). The deceleration was primarily attributed to negative contribution from external trade. External trade subtracted 2.2pp from EAI-GDP growth in Jan’25 vs. 1.2pp subtraction in Dec’24. On the other hand, consumption grew at a three-month high rate of 6.8% in Jan’25 vs. 5.5% in Dec’24. Additionally, investment growth accelerated to 6.2% in Jan’25 from 5.9% in Dec’24. Excluding fiscal spending, EAI-GDP grew 2.6% YoY in Jan’25 vs. 4.1% growth in Dec’24. (Exhibits 3 and 4)
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