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Economic Activity Growth At 3-month Low In Jan 2020

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Economic Activity Growth At 3-month Low In Jan 2020
Himali Patel - 04 March 2020

The current economic growth has declined from approximately 6 per cent Year-on-Year (Y-o-Y) in November/December 2019 to 5.1 per cent Y-o-Y in January 2020, the lowest in the past three months. As per the report “The Economy Observer” by Motilal Oswal Institutional Equities, their in-house Economic Activity Index (EAI) for India’s real GVA (called EAI-GVA) has attribute the decline towards a high base and a weak services sector led by a decline in fiscal spending. Although 2020 was expected to be on a positive trend led by 7-8 year high Purchasing Managers’ Index (PMI) indices, the actual data states a different story with an economic growth hitting three-month low.

“Since fiscal spending is expected to remain weak in Feb-Mar 2020 as the government attempts to meet its FY20RE deficit target, a recovery in 4QFY20 appears difficult. Consequently, we believe that real GDP growth would be ~4.5 per cent in 4QFY20 - similar to 4.7 per cent in 3QFY20, implying ~5 per cent growth in FY20,” pointed out the report. Further as per EAI-GVA data, a moderation observed in the headline index was led by a decline in fiscal spending, which dragged down the growth in the services sector from 7.6 per cent Y-o-Y in December 2019 to 5.4 per cent in January 2020.

On the flipside, the farm activities continued to grow strongly at 6 per cent Y-o-Y, while the industrial sector rose at 4 per cent Y-o-Y in January 2020 versus 2 per cent growth in the previous month.

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