Modi's WORST growth year; FY18 GDP may slip to 4-yr low

This is mainly due to GST impact on manufacturing and subdued farm output.

Illustration: Uttam Ghosh/Rediff.com

India's economic growth is estimated to slow down to 4-year low of 6.5 per cent this fiscal, the lowest under the NDA regime, mainly due to GST impact on manufacturing and subdued farm output.

The Gross Domestic Product (GDP) was 7.1 per cent in 2016-17 and 8 per cent in the preceding year. It was 7.5 per cent in 2014-15.

The Narendra Modi-led NDA government had assumed office in May 2014.

The growth of gross value added (GVA) in manufacturing sector too is expected to decelerate to 4.6 per cent this fiscal, down from 7.9 per cent in 2016-17.

As regards the farm sector, the expansion in activities in agriculture, forestry and fishing sectors is likely to slow to 2.1 per cent in the current fiscal from 4.9 per cent in the preceding year.

"Is there an impact of the GST (Goods and Service Tax) on average growth? The answer is, to some extent, of course and I explain why," chief statistician T C A Anant told reporters after the Central Statistics Office released advance estimates of national accounts today.

Elaborating further, he said, "When we did the first quarter estimates, we had explained this that because of fact that the GST is going to be implemented from July 1, there will be natural anticipation of GST...by the manufacturing sector.

“Since the first quarter is part of whole year, the manufacturing includes the first quarter as part of it. Yes that impact is built into the exercise."

Commenting on the CSO estimates, Economic Affairs secretary Subhash Chandra Garg said GDP growth forecast of 6.5 per cent for 2017-18 implies growth of 7 per cent for the second half of the fiscal.

"(This) confirms strong turnaround of economy. Investment growth of almost twice of last year’s indicate investment is reviving," he said in a tweet.

About the agriculture sector, Chief Statistician Anant said, "So far agriculture is concerned, there is certain amount of statistical base reversion to mean, which is seen because last is very high growth rate after continuous years of drought."

He further said, "Actual total production figure would be the second highest in very long period of time. This is not unusual growth rate of agriculture in a good year."

On recovery, Anant explained that the growth in the first and second quarters were estimated at 5.7 per cent and 6.3 per cent, respectively and for rest of year, it is worked out at 7 per cent, indicating an increasing trend.

The growth of real Gross Value Added (GVA) in 2017-18 is anticipated at 6.1 per cent as against 6.6 per cent in the previous year.

Economic activities were affected by demonetisation announced on November 8, 2016 and subsequent implementation of a new indirect tax regime (GST) from July 1 in the current financial year.

A barometer of investment, Gross Fixed Capital Formation (GFCF) at current prices is estimated at Rs 43.84 lakh crore in 2017-18 as against Rs 41.18 lakh crore in 2016-17.

At constant (2011-12) prices, the GFCF is estimated at Rs 37.65 lakh crore in 2017-18 as against Rs 36.02 lakh crore in 2016-17.

CII director general Chandrajit Banerjee said it is heartening that gross fixed capital formation is on a recovery path, as a turnaround in investments is imperative for a sustained recovery to take hold.

According to the CSO, the sectors which registered growth rate of over 7 per cent are: public administration, defence and other services; trade, hotels, transport, communication and services related to broadcasting; electricity, gas, water supply and other utility services; and financial, real estate and professional services.