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EAI – Monthly Dashboard: Slowdown in economic activity in Dec’24

Expect real GDP growth at 5.7-6.0% in 3QFY25

* Preliminary estimates indicate that India's EAI-GVA growth decelerated to a three-month low of 5.5% YoY in Dec’24 vs. 6.4% each in Nov’24/Dec’23. The deceleration was primarily due to three-month slowest growth in the services sector. Conversely, agriculture and industrial sector growth remained robust. In 3QFY25, EAI-GVA grew 5.9%, higher than 5.3% in 2QFY25, but lower than 7.7% in the same quarter last year.

* EAI-GDP growth picked up to 5.0% YoY in Dec’24 vs. a growth of 0.8% YoY each in Nov’24/ Dec’23. Acceleration was primarily led by higher consumption growth (7.0% in Dec’24 vs. 4.6% in Nov’24). In contrast, investment growth decelerated to 4.7% in Dec’24 from 5.7% in Nov’24). Additionally, external trade subtracted 1.3pp from EAI-GDP growth. Excluding fiscal spending, EAI-GDP grew 4.6% YoY in Dec’24 vs. a growth of 0.6% in Nov’24. In 3QFY25, EAI-GDP grew 5.3% (highest in 5 quarters) vs. 2.3% each in 2QFY25/3QFY24, mainly led by consumption, which picked up to a 5-quarter highest pace of 6.6%.

* Selected HFIs portray an improvement in economic activity for Jan’25. Toll collections surged at a 16-month high pace of 14.8% in Jan’25; PV sales rose in double digits though lower than the last month; while CV sales grew at a 9-month high and growth in Vaahan registrations was better than last month, PMIs remained resilient. On the other hand, power generation grew at a three-month slow pace.

* After surprising in each of the four quarters of FY24, real GDP growth dipped shockingly to a seven-quarter low of 5.4% in 2QFY25. Our in-house models suggest that economic growth improved to 5.9% in 3QFY25. Meanwhile, HFIs portray an improvement in economic activity for Jan’25. Accordingly, we believe that India’s real GDP growth could improve to 5.7%-6.0% YoY in 3QFY25 vs. 5.4% in 2QFY25, much lower than the RBI’s forecast of 6.8%.

* EAI-GVA growth at a three-month low in Dec’24: Preliminary estimates indicate that India's EAI-GVA growth decelerated to a three-month low of 5.5% YoY in Dec’24 vs. 6.4% each in Nov’24/Dec’23. The deceleration was primarily due to the three-month slowest growth in the services sector. Conversely, agriculture and industrial sector growth remained robust. In 3QFY25, EAI-GVA grew 5.9%, higher than 5.3% in 2QFY25, but lower than 7.7% in the same quarter last year (Exhibits 1 and 2)

* EAI-GDP growth accelerated to 5.0% in Dec’24: EAI-GDP growth picked up to 5.0% YoY in Dec’24 vs. a growth of 0.8% YoY each in Nov’24/ Dec’23. Acceleration was primarily led by higher consumption growth (7.0% in Dec’24 vs. 4.6% in Nov’24). In contrast, investment growth decelerated to 4.7% in Dec’24 from 5.7% in Nov’24). Additionally, external trade subtracted 1.3pp from EAI-GDP growth. Excluding fiscal spending, EAI-GDP grew 4.6% YoY in Dec’24 vs. a growth of 0.6% in Nov’24. In 3QFY25, EAI-GDP grew 5.3% (highest in 5 quarters) vs. 2.3% each in 2QFY25/3QFY24, mainly led by consumption, which picked up to a 5-quarter highest pace of 6.6% (Exhibits 3 and 4)

* Total consumption growth accelerated to 7.0% YoY in Dec’24: Total consumption (private + government) grew at a 4-month high pace of 7.0% YoY in Dec’24 vs. +4.6%/-0.5% in Nov’24/Dec’23, led by revival in fiscal spending (up 1.3% in Dec’24 vs -12.2% in Nov’24), an eight-month high petrol sales growth, strong double-digit personal credit growth, and likely higher growth in consumer non-durables output. Conversely, auto sales marked its second consecutive contraction in Dec’24. Notably, private consumption grew at a 23-month high pace of 6.9% in Dec’24 vs. +5.5%/-0.1% in Nov’24/Dec’23. (Exhibit 11).

* Investment growth decelerated to 4.7% in Dec’24: According to our estimates, investment grew 4.7% YoY in Dec’24, following a growth of 5.7% in Dec’24. The deceleration in investment growth is attributed to likely lower capital goods production, subdued construction activity, and lower diesel sales. On the other hand, the government’s capex, capital goods imports, CV sales, and steel production witnessed improvement in Dec’24 as compared to Nov’24 (Exhibit 12). Meanwhile, net exports subtracted 1.3pp (vs 4.1pp in Nov’24) from EAI-GDP growth in Dec’24 as imports grew faster than exports.

* Agriculture sector growth remained robust; services growth decelerated: In terms of EAI-GVA, the non-farm sector growth decelerated to 5.5% in Dec’24, the slowest in three months led by lower services sector growth. The services sector grew at a three-month slow pace of 4.8% YoY in Dec’24 vs. 5.6%/7.2% in Nov’24/Dec’23. This was led by the second consecutive contraction in auto sales, the 22-month slow growth in real deposits, and the deceleration in PMI services growth. In contrast, the industrial sector grew decently, though at a slower pace than last month, printing at 7.0% in Dec’24 vs. 8.7% in Nov’24. Within the industrial sector, mining and electricity sector growth accelerated, while growth in the manufacturing and construction sectors decelerated but remained decent. At the same time, the farm sector growth remained robust, accelerated to 5.1% in Dec’24 (4.6% in Nov’24 and 1.2% in Dec’23). (Exhibit 13).

* HFIs portray improvement in economic activity in Jan’25: Selected HFIs portray an improvement in economic activity for Jan’25. Toll collections surged at a 16- month high pace of 14.8% in Jan’25; PV sales rose in double digits though lower than the last month; while CV sales grew at a 9-month high and growth in Vaahan registrations was better than last month, PMIs remained resilient. On the other hand, power generation grew at a three-month slow pace (Exhibit 14).

* Expect real GDP growth at 5.7-6.0% YoY in 3QFY25, lower than the RBI’s forecast of 6.8%: After surprising in each of the four quarters of FY24, real GDP growth dipped shockingly to a seven-quarter low of 5.4% in 2QFY25. Our inhouse models suggest that economic growth improved to 5.9% in 3QFY25. Meanwhile, HFIs portray an improvement in economic activity for Jan’25. Accordingly, we believe that India’s real GDP growth could improve to 5.7%- 6.0% YoY in 3QFY25 vs. 5.4% in 2QFY25, much lower than the RBI’s forecast of 6.8% (Exhibits 9, 10).

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