GDP growth may sink to 6.5%

GST impact to slowdown India's 2017-18 GDP growth to 6.5

After Rahul, Chidambaram criticized reduced GDP and Modi-led-Govt

The gross value added (GVA) is projected to grow by 6.1% in 2017-18, down from 6.6% in 2016-17.

Gross Value Added (GVA) was also projected to expand by 6.1% in 2017-18, slowing from 6.6% in the preceding fiscal year, according to the first advance estimates of national income for 2017-18, released by the CSO.

"The growth in GDP during 2017-18 is estimated at 6.5% as compared to the growth rate of 7.1% in 2016-17", the Ministry of Statistics & Programme Implementation said in its estimate of National Income for 2017-18.

GDP at current prices - the big macroeconomic number that serves as the foundation for the budget math - is expected to attain a level of Rs 166.28 lakh crore, reflecting a 9.5 per cent growth over the previous year. The crucial farm sector is estimated to grow 2.1% in 2017-18, slower than the 4.9% in the previous year, while the manufacturing sector may grow by an annual 4.6%, sharply lower than the 7.9% posted in 2016-17.

Former Planning Commission Deputy Chairman Montek Singh Ahluwalia said the GDP growth would be around 6.2 per cent to 6.3 per cent for the current fiscal.

He said that 6.5 per cent for the full year meant that Q3 and Q4 numbers will be far better than first half of the year.

GDP growth was 7.1 per cent last fiscal. The reasons for decline in the growth rate could be attributed to demonetisation and the Goods and Services Tax (GST). As per the CSO data, the expansion in activities in "agriculture, forestry and fishing" is likely to slow to 2.1 per cent in the current fiscal from 4.9 per cent in the preceding year.

These will be the first official full-year growth estimates after GST's rollout. However, the fiscal deficit at the end of November touched Rs 6.12 lakh crore, or 112 per cent of the budget estimate for 2017-18, mainly because of weak GST collections and higher government spending. GDP had grown by 6.3 per cent in Q2 (July-September period) of FY18 (the latest quarter for which real data is available), after falling for the straight last five quarters, which had raised hopes in the government that the slowdown in the economy had bottomed out.

"Even the current GDP forecast of 6.5 per cent is likely to be hard to attain, given that growth in the first half was just 6 per cent", Rao added. "We expect growth to normalise gradually over the next four to six quarters as the disruptive impact of major policy changes fades", Standard Chartered said.

Despite the poor estimates, the analysts are optimistic about economic growth in 2018-19. On other hand, a higher real GDP growth could well be an indicator about GST's minimal impact on prices of goods and services.

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