Motilal Oswal expects India's real GDP growth to be 20% YoY in Q1

India's real GDP is expected to grow by 20 per cent on a year-on-year (YoY) basis in the first quarter of FY22, Motilal Oswal Financial Services (MOFS) said in a report.

According to MOFS' EcoScope report, the 'Economic Activity Index' for India's real GVA grew by 11.6 per cent YoY in June, after growing 22.8 per cent YoY in May.

"It implies EAI-GVA growth of 22.6 per cent YoY in 1QFY22, following a contraction of 14.4 per cent YoY in 1QFY21. A low base led to higher double-digit growth in the non-farm sector, while farm activity grew 6.6 per cent in the quarter," the report said.

"The estimates suggest that India's real GDP growth was 20 per cent YoY in 1QFY22, which is in line with our expectations," it asserted.

Notwithstanding the double-digit growth in 1QFY22, the real GDP growth would slow towards 5-7 per cent in the remaining quarters of FY22.

"The way EAI-GVA, EAI-GDP was also supported largely by a low base. Although EAI-GDP grew by a modest 3.6 per cent YoY in June as against 11.6 per cent YoY in May, it increased by 23 per ent YoY in 1QFY22 as against a contraction of 21.2 per cent YoY in Q1FY21.

"While private consumption grew by 18 per cent YoY in 1QFY22, government revenue spending contracted in real terms in the quarter. Preliminary estimates indicate India's EAI for GVA posted lower double-digit growth of 11.6 per cent YoY in June, after growing 22.8 per cent YoY in May," the report said.

Further as per the report, the data for July indicated a recovery. "India Manufacturing PMI picked up strongly, merchandise exports were at a record high," it noted.

"Power generation grew faster, and there was a strong recovery in e-way registrations and toll collections in July '21. It confirms that the reopening has had an improving effect on the Indian economy, and will sustain for a few more months, unless India is hit by the much-feared third Covid wave," concludes the MOFSL's report.