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The Economy Observer: Economic activity weakened in October 2017

04-Dec-2017

India's monthly economic activity index (EAI) grew at 2.1% YoY in October 2017, the slowest in four months. The average growth in 2QFY18 was 5% YoY. High base and continued decline in fiscal spending led to the weaker growth.
While the deceleration was broad-based, stagnancy in investments - driven primarily by renewed weakness in construction activities and imports of capital goods - was the key driver of slower headline growth. As exports contracted for the first time in 15 months, net imports also acted as a serious drag on EAI growth.
Consumption index grew decently at ~5% YoY in October 2017, driven by 11-month high growth in passenger traffic.Fiscal spending, however, contracted for the second consecutive month.
Overall, we believe that real GVA growth could fall below 6% again in 3QFY18 before recovering to ~6.5% in 4QFY18. It implies real GDP growth of ~6% in 3Q and ~7% in 4QFY18.

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