Motilal Oswal Financial Services on Monday projected a real gross value added (GVA) growth of 7 to 8 per cent year-on-year in the second quarter of current fiscal year versus 20.1 per cent growth in 1Q FY22.

       It said estimates suggest some moderation in economic activity index (EAI)-GVA growth in July, largely on account of weaker fiscal spending. On the other hand, private spending (consumption and investments) has grown decently.

       Motilal Oswal said although there is no one-to-one correlation between its EAIs and the official GDP/GVA due to the underlying differences, the composite indices move in sync with the official real GDP (ex-discrepancies) and real GVA estimates.

       "Accordingly, we expect real GVA growth of 7 to 8 per cent year-on-year in 2Q FY22 versus 20.1 per cent year-on-year growth in 1Q FY22."

       It said private consumption grew at the three-month highest pace in July. Investment growth moderated while EAI-GVA grew slower at 7.7 per cent. Covid third wave fears seem to be restricting economic growth in August as well.

       Motilal Oswal said total consumption grew 5.1 per cent versus 2.7 per cent in June and minus 12.1 per cent in July last year. Within consumption, private consumption grew at a three-month high of 6.9 per cent though government consumption fell 31 per cent in July.

       Most of the indicators analysed on a monthly basis to track the progress in economic growth paint a mixed picture for August.

       "While e-way registrations, toll collections, mobility indices, and power generation have increased at a faster rate, auto registrations and manufacturing PMI have weakened in the recently-concluded month. Fears of a potential third wave seem to be restricting economic activity at this stage."

       While government capex declined for the second time in first four months of FY21, private sector saw a decent growth on low base of July last year.

       "And while manufacturing sector grew strong, weak construction activity, slower growth in auto sales and decline in government spending led to slower growth in non-farm sector," said Motilal Oswal.

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