The Economy Observer
3 September 2020
Economic activity in Jul’20 as bad as in Jun’20
Real GDP could decline ~5% YoY in 2QFY21
Our in-house Economic Activity Index (EAI) for India’s real GVA (called EAI-GVA) contracted 5.6% YoY in Jul’20 (similar
decrease was witnessed in Jun’20) – marking its fifth successive monthly decline. Farm activities, however, remained
strong, while the non-farm sector dropped ~7%. Decline in industrial activities was a tad slower, while it was marginally
higher for the services sector.
EAI-GDP index (our in-house measure of the official GDP) also contracted 5.9% YoY in Jul’20, worse than the 3.3%
decline a month ago. Interestingly, while private consumption and total investments decline was slower (v/s the fall in
Jun’20), muted growth in government consumption and sluggish decline in imports led to faster contraction in EAI-GDP
in Jul’20. Excluding government spending, EAI-GDP contracted 8% YoY in Jul’20 (v/s the 6% decline in Jun’20).
Overall, the recovery path seems to have flattened since Jun’20. Not only does our EAI suggest similar contraction in
economic activities in Jul’20, but also few indicators available for Aug’20 indicate that the fall has continued almost
unabated. Consequently, we expect another decline of 4-5% YoY in 2QFY21, before real GDP posts a modest growth in
3QFY21. An important factor to ponder over now is whether economic activity will start growing from Oct-Nov’20 and
continue after the festive season. Since the COVID-19 pandemic is still not contained in the country and partial
lockdowns are being reintroduced, the progress needs to be closely watched.
reveal that India’s EAI for
GVA contracted 5.6% YoY in
Jul’20 (was as worse as in
Jun’20) – marking its fifth
Jul’20 EAI-GVA decline similar to that in Jun’20…:
Preliminary estimates reveal
that India’s EAI for GVA contracted 5.6% YoY in Jul’20 – marking its fifth
consecutive decline – and was as worse as in Jun’20
activities posted double-digit growth for the second successive month, the
services sector declined marginally faster than in Jun’20 (led by slower growth in
fiscal spending), while industrial activities contracted slightly slower than a
…and EAI-GDP also contracted at a similar pace:
EAI-GDP also fell ~6% YoY in
Jul’20, better than the 3.3% decline in the previous month
Interestingly, while private consumption expenditure (PCE) and total
investments fell slower (vis-à-vis Jun’20), slower growth in fiscal spending and
lesser contraction in imports led to faster fall in EAI-GDP
government consumption, EAI-GDP contracted 8% YoY in Jul’20, compared to
6% in Jun’20.
Exhibit 2: …due to continued slowdown in non-farm sector
Exhibit 1: India’s EAI-GVA declined 5.6% YoY in Jul’20…
EAI-GVA (% YoY)
6.9 4.4 2.8 1.3 5.7 5.8 4.8 6.6
Please refer to our earlier
Contribution of different components to EAI-GVA growth
Source: Various national sources, CEIC, MOFSL
– Research analyst
– Research analyst
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