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Motilal Oswal Report
Preliminary estimates indicate that India's economic activity index for gross value added clocked 10% YoY growth in May 2023 versus 9.3%/18.3% in April 2023/May 2022.
Higher growth was led by robust services sector growth, which posted double-digit growth for the fifth consecutive month in May-23 (10.7% in May-23 versus 10.9% in April 2023).
Additionally, the industrial sector also grew at double digits for the second consecutive month, with some improvement in the farm sector as well. EAI-gross domestic product growth, however, was unchanged at 4.7% YoY in May-23 versus 4.7%/14.6% YoY in April-23/May-22, led by faster growth in private consumption and investments, which were offset by weaker fiscal spending and higher net imports.
Excluding fiscal spending, EAI-GDP grew 5.9% YoY in May-23 versus 5.0% YoY in Apr-23.
A look at limited available data for June-23 suggests that India's growth weakened in June-23. Manufacturing Purchasing Managers' Index fell to 57.8 in June-23 from 58.7 in May-23, but it still remained in the expansionary territory.
Additionally, a contraction in commercial vehicle sales, weak freight traffic growth, deceleration in toll collections and passenger vehicle sales growth, and falling water reservoir levels would have adversely impacted economic activity in June-23.
Overall, after better-than-expected growth in Q4 FY23, our calculations suggest that EAI grew decently in May-23 as well. However, it is clear that economic data has weakened in June-23. Accordingly, real GVA/GDP growth could be 6-7% YoY in Q1 FY24, lower than the Reserve Bank of India's projection of 8%.
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