EcoScope Back
The Economy Observer: Economic activity weakened in October 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.