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Motilal Oswal Report
Preliminary estimates indicate that India's economic activity index for gross value added grew at a seven-month high of 9.9% YoY in Jan-23 as against 6.9% YoY in Dec-22. This was driven by acceleration across all sectors.
While the farm sector grew marginally faster, non-farm sector rose at a seven-month high pace in Jan-23, partly supported by a low base. Both industry and services sectors performed well in Jan-23 as compared to Dec-22.
EAI-gross domestic product grew 10.2% YoY in Jan-23 versus 5.4% YoY a month ago. This was fueled by a sharp eight-month high total consumption growth of 10.2% YoY in Jan-23, a large part of which was propelled by massive government consumption spending. However, even after excluding fiscal spending, private consumption rose at a seven-month high of 6.6% YoY during the month.
Investments, on the other hand, grew at a three-month low of 10.5% YoY in Jan-23. Government's real capex, on the brighter side, surged 59.8% YoY in Jan-23 as against down 63.7% YoY a month ago. Further, net exports' contribution to EAI-GDP growth dropped 70%, leading to an overall drag.
Out of the six available indicators for Feb-23, only Puchasing Managers' index manufacturing and Vahaan registration have done better on YoY basis. Toll collections, power generation, forex reserves and currency with public decelerated.
Overall, economic activity was upbeat in Jan-23, largely on account of a low base. However, we expect economic activity to weaken (as early signs indicate) during Feb-Mar-23 as the base effect wanes. Accordingly, we forecast a 4.6-4.8% YoY growth in real GDP in Q4 FY23, implying a full-year growth of 6.8-6.9%.
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