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EAI monthly dashboard: Economic activity improves slightly in Feb’25

Expect real GVA growth at 6.0-6.5% in 4QFY25

* Preliminary estimates indicate that India's EAI-GVA growth rose to 5.1% YoY in Feb’25 vs. 4.9%/8.0% in Jan’25/Feb’24. The slight acceleration (vis-à-vis Jan’25) was primarily due to stronger growth in services and five-month high growth in the farm sector. Conversely, growth in the industrial sector decelerated to a five-month low in Feb’25, mainly led by mining and construction sectors.

* EAI-GDP grew 3.1% YoY in Feb’25, similar to 3.0% YoY in Jan’25 but lower than 4.0% YoY in Feb’24. The positive contribution from external trade was almost entirely offset by lower consumption (lowest in five months) and investments (lowest in three months) growth. External trade added 0.7pp to EAI-GDP growth in Feb’25 vs. 2.2pp subtraction in Jan’25. Excluding fiscal spending, EAI-GDP grew 4.4% YoY in Feb’25 vs. 2% growth in Jan’25.

* Selected high-frequency indicators (HFIs) portrayed a mixed trend in economic activity for Mar’25. Toll collections growth decelerated to 11.9% in Mar’25; power generation growth decelerated slightly to 6.4% in Mar’25 (vs. 6.7% in Jan’25); and vaahan registrations growth improved but remained in contraction (-0.7% in Mar’25 vs. -6.6% in Feb’25). On the other hand, CV sales grew at an 11-month high rate of 6.2%, PV sales rose in double digits and PMIs remained resilient.

* Our in-house models suggest that economic growth improved slightly in Feb’25 (vs. Jan’25), with EAI-GVA reaching 5.1% (vs 4.9% YoY in Jan’25). Additionally, HFIs’ mixed portrayal of economic activity in Mar’25 suggests that economic activity did not see a substantial pickup. As a result, we believe that real GVA growth could remain at 6.0-6.5% YoY in 4QFY25, lower than NSO’s projection of 6.8% (and 6.2% YoY in 3QFY25).

* EAI-GVA growth picked up slightly in Feb’25: Preliminary estimates indicate that India's EAI-GVA growth rose to 5.1% YoY in Feb’25 vs. 4.9%/8.0% in Jan’25/Feb’24. The slight acceleration was primarily due to stronger growth in services and five-month high growth in the farm sector. Conversely, growth in industrial sector decelerated to a five-month low in Feb’25 (Exhibits 1 and 2).

* EAI-GDP grew 3.1% in Feb’25: EAI-GDP grew 3.1% YoY in Feb’25, similar to 3.0% YoY in Jan’25 but lower than 4.0% YoY in Feb’24. The positive contribution from external trade was almost entirely offset by lower consumption and investments growth. External trade added 0.7pp to EAI-GDP growth in Feb’25 vs. 2.2pp subtraction in Jan’25. Excluding fiscal spending, EAI-GDP grew 4.4% YoY in Feb’25 vs. 2% growth in Jan’25 (Exhibits 3 and 4).

* Investment growth decelerated to 3.3% in Feb’25: According to our estimates, investment growth decelerated to 3.3% YoY in Feb’25, lowest in four months (vs. 7.3% in Jan’25). The deceleration was mainly led by contraction in capital expenditure of the Central government, lower capital goods imports and production, and a decline in diesel sales (Exhibit 12). Meanwhile, net exports added 0.7pp (vs. subtraction of 2.2pp in Jan’25) to EAI-GDP growth in Feb’25 as imports contracted more than exports.

* Total consumption growth decelerated to 2.6% YoY in Feb’25: Total consumption (private + government) grew at a five-month low pace of 2.6% YoY in Feb’25 vs. +5.3%/3.8% in Jan’25/Feb’24, led by contraction in fiscal spending (down 18.5% in Feb’25 vs. 19.4% growth in Jan’25, worst in 16 months), contraction in auto sales (worst growth in 34 months), and the five-month slowest growth in petrol sales. Notably, private consumption grew 4.0% in Feb’25 vs. +3.8%/3.1% in Jan’25/Feb’24. (Exhibit 11)

* Agriculture sector growth remained robust; industrial sector growth decelerated: In terms of EAI-GVA, the non-farm sector’s growth accelerated slightly to 5.0% in Feb’25 vs. 4.9% in Jan’25, mainly led by a pickup in the services sector, which was partly offset by a slowdown in the industrial sector. The services sector grew 4.6% in Feb’25 vs. 3.3%/8.3% in Jan’25/Feb’24. In contrast, the industrial sector growth decelerated to a five-month low of 5.7% in Feb’25 vs. 7.6%/9.4% in Jan’25/Feb’24. The deceleration in industrial sector growth was mainly led by a slowdown in mining and construction sectors. Manufacturing sector growth also decelerated but remained robust (7.2% in Feb’25 vs. 8.8% in Jan’25). Notably, the farm sector’s growth remained robust at 5.3% in Feb’25 (highest in four months) vs. 4.6% in Jan’25 and 1.9% in Feb’24. (Exhibit 13).

* HFIs portrayed a mixed picture for economic activity in Mar’25: Select HFIs signaled a mixed trend in economic activity for Mar’25. Toll collections growth decelerated to 11.9% in Mar’25; power generation growth decelerated slightly to 6.4% in Mar’25 (vs. 6.7% in Jan’25); vaahan registrations growth improved but remained in contraction (-0.7% in Mar’25 vs. -6.6% in Feb’25). On the other hand, CV sales grew at an 11-month high rate of 6.2%; PV sales rose in double digits; and PMIs remained resilient. (Exhibit 14).

* Expect real GVA growth at 6.0-6.5% YoY in 4QFY25, lower than CSO’s forecast of 7.6%: Real GDP growth improved in 3QFY25, reaching 6.2% (vs. our forecast of 5.7%) after plunging to a seven-quarter low of 5.6% in 2QFY25. Our in-house models suggest that economic growth improved slightly in Feb’25 (vs. Jan’25), with EAI-GVA reaching 5.1%. Additionally, HFIs portrayed a mixed picture for economic activity in Mar’25, suggesting that economic activity did not see a substantial pickup. As a result, we believe that real GVA growth could remain at 6.0-6.5% YoY in 4QFY25, lower than NSO’s projection of 6.8% (Exhibits 9 and 10).

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