GDP growth may sink to 6.5%

The note comes days after the Central Statistical Office came out with its advanced estimates of growth for FY18 suggesting a slowdown in GDP expansion to 6.5% the lowest in four years

This is the slowest pace of growth in the country's economy in the last four years.

"An arrogant Prime Minister Narendra Modi and a failed Finance Minister Arun Jaitley, hell bent upon ignoring economic wisdom, have dealt a catastrophic blow to India's growth story as proved by the latest GDP estimates slumping from 7.3 per cent to 6.5 per cent", he said. 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. He also indicated that the government could find it hard to achieve its fiscal deficit target of 3.2 per cent of GDP.

Commenting on the advance growth estimate released by the CSO here on Friday, NITI Aayog vice-chairman Rajiv Kumar said that the GDP growth will become more robust in 2018-19."The economic activity has been picking up over the past three quarters and can be expected to strengthen in the coming period", he said. That is a full one per cent downgrade from the FM's earlier projection of around 7.5 per cent growth this financial year.

"Advance GDP growth estimate of 6.5 per cent shows that the reform measures undertaken by the government are yielding results, because 6.5 per cent for the full year means that Q3 and Q4 numbers will be far better than first half of the year. The investment growth of nearly twice of a year ago indicates that investment is reviving", economic affairs secretary Subhash Chandra Garg said. The data also showed that manufacturing output returned to growth after a weak second quarter, although construction output contracted for the second quarter in a row.

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CSO estimates suggest that in the current fiscal, the (Gross Value Added) growth in agriculture, forestry and fishing sector is set to decline to 2.1% as against the previous year's growth rate of 4.9%. Notably, the expected growth rate is lesser than last two year's GDP of 7.1 percent and 8 percent respectively.

As GST collections slipped to Rs 80,808 crore in November, down from an average of Rs 90,000 crore in the previous months, and with the government planning to borrow an additional Rs 50,000 crore via gilts, which is double the amount that was estimated by the market, the GDP growth for FY18 may range between 6% and 6.5%.

"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".

Economic Affairs Secretary Subhash Chandra Garg said: "GDP growth of 6.5 per cent for 2017-18 implies growth of 7 per cent for the second half".

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GDP growth may sink to 6.5%

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