Published: Mon, January 08, 2018
Markets | By Rosalie Gross

GDP growth estimated at 6.5%

GDP growth estimated at 6.5%

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.

A string of data released this week also points to an ongoing economic recovery after economic growth had slowed down to a three-year low in the April-June quarter, on the back of destocking ahead of GST (Goods and Services Tax) implementation and the lingering impact of demonetisation.

According to Department of Agriculture and Cooperation's data, the production of food grains during the Kharif season of agriculture year 2017-18 was 134.67 million tonnes as compared to 138.52 million tonnes during the same period in 2016-17.

"GDP growth of 6.5% for 2017-18 implies growth of 7% for the second half".

However, there is a difference between the way manufacturing data is calculated in the GDP and the IIP. If the economy grows at 6.8 per cent in Q3 and 7.2 per cent in Q4 supported by base effects, we are likely to achieve the CSO advance estimates. This is less than half of the last year's growth rate of 4.9%.

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GDP growth estimated at 6.5%

Sharpest growth in this fiscal is estimated in sectors of Public administration, defence and Other Services (9.4 per cent) and Trade, hotels, transport, communication and services related to broadcasting (8.7 per cent).

Tax revenue: The GST impacted net taxes and these are projected to grow only 10.9 per cent in the current financial year against 12.8 per cent in the previous year. Gross Fixed Capital Formation (GFCF), a proxy for private investment in the country is set to be 29% of the GDP in 2017-18 as against 29.5% in 2016-17.

The usefulness of advance estimates is that they help the finance ministry in making Budget projections for the next financial year.

The growth in the agriculture, forestry and fishing sector is expected at a sluggish 2.1 per cent (as against 4.9 % growth recorded in 2016-17), while manufacturing is expected to grow at 4.6 % (as against 7.9 per cent in 2016-17). 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.

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