GDP growth may slow down to 6.5% in FY18

Tammy Harvey
January 6, 2018

The data disclosed that sectors like "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" registered a growth rate of over 7 percent.

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 per cent as compared to the growth rate of 7.1 per cent in 2016- 17", said the Central Statistics Office (CSO) while announcing the first advance estimates of National Income 2017-18. The per capita income in real terms (at 2011-12 prices) during 2017-18 is likely to attain a level of Rs 86,660 as compared to Rs 82,269 for the year 2016-17, it said. "GDP growth of 6.5% for 2017-18 implies growth of 7% for the second half".

"It is hard for GDP to cross 7 per cent this fiscal unless the base is revised downwards".

The disruption introduced by the implementation of Goods and Services Tax is expected to take a major toll on the sector.

The country's economy is estimated to slow to a 4-year low of 6.5% in 2017-18, dragged down by sluggish manufacturing and farm sectors and the impact of rollout issues linked to the Goods & Services Tax (GST) and demonetisation on businesses but most economists said they expect the number to be revised upwards as the second half of the fiscal year is expected to fare better. Gross value added (GVA) growth is forecast at 6.1% against 6.6% past year. The latest estimates for full year suggest there is no change in trend. Anant said CSO's projections for the first advance estimates were therefore conservative.

Despite the poor estimates, the analysts are optimistic about economic growth in 2018-19. The Reserve Bank of India expects the economy to grow by 6.7% in 2017-18.

Moody's Investors Service had raised India's sovereign rating for the first time in over 13 years, saying that growth prospects have improved with continued economic and institutional reforms.

"Given the tepid growth estimates from agriculture, it gives us a feeling that the budget 2018 will have a higher focus on agriculture and rural economy".

"Economic activity has been picking up over the last three quarters and can be expected to strengthen in the coming period with the manufacturing PMI [Purchasing Managers' Index] now reading at a five-year high of 54, and FMCG demand picking up briskly", Vice Chairman of NITI Aayog Rajiv Kumar said in a written statement.

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