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Systematix Research Report
The upside surprise in the latest Q1 FY23 gross domestic product numbers with headline real growth of 7.8% has been reassuring on the surface, but under the veil lies several fault lines as the attempts to map it to the real economy highlight the discordance;
sharp rebound in consumer spending in the expenditure GDP whereas high-frequency indicators show otherwise,
while services sector growth has been a large contributor to the rebound, almost all employment-intensive services sector indicators have decelerated or contracted,
deceleration in capital formation despite the bazooka of government capex pose a question mark on private capex recovery,
a sharp deceleration in nominal GDP amid a sharper decline in the deflator, and
unusual negative correlation between the deflator and the real GDP growth over the past two quarters, misaligned with its positive historical trend reflects the underlying weak demand situation.
And lastly, these misalignments are exposing fiscal vulnerabilities which can be accentuated in the run-up to several states and general elections. We see crucial market implications from the fiscal Catch-22 logjam
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