GDP growth may sink to 6.5%

Jan 06, 2018, 01:53
GDP growth may sink to 6.5%

The services sector, which accounts for almost 60% of the economy, is estimated to grow 8.3% in 2017-18, higher than the 7.7% in 2016-17.

"Real GDP or Gross Domestic Product (GDP) at constant (2011-12) prices in the year 2017- 18 is likely to attain a level of '129.85 lakh crore, as against the Provisional Estimate of GDP for the year 2016-17 of ' 121.90 lakh crore, released on 31st May 2017".

Data released by the Central Statistical Organisation (CSO) on Friday showed the economy is estimated to grow 6.5% in 2017-18, slower than the 7.1% in 2016-17 and lower than the government's estimate of 7.5%.

"Real GVA, i.e, GVA at basic constant prices (2011-12) is anticipated to increase from '111.85 lakh crore in 2016-17 to '118.71 lakh crore in 2017-18". Reacting on the growth estimates, Kumar said the GDP growth in the second half of 2017-18 had risen to 7 per cent bringing the annual growth rate to 6.5 per cent. "Implicit calculation suggests growth in the second half of 2017-18 will be better thatn the first". He also indicated that the government could find it hard to achieve its fiscal deficit target of 3.2 per cent of GDP. 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.

Anis Chakravarty, Lead Economist, Deloitte, said the estimate for yearly GDP showed that the growth momentum was expected to improve in the coming quarters in line with expectations and signals from leading indicators.

The growth rate of the agriculture, fishing and forestry sector is expected to decline from 4.9% in 2016-'17 to 2.1% in 2017-'18.

The EAC-PM Chairman said the advance estimate numbers only reinforce what was already known - that reforms undertaken by the government will place the economy on an upward growth trajectory, without compromising on fiscal consolidation.

This may affect the fiscal deficit, which the government had hoped to cap at Rs 5.46 lakh crore this year.

Reacting to the numbers, analysts said they expect GDP growth for the fiscal to go above the 6.5 per cent-mark due to a favourable base effect.

The advance estimates have, however, been compiled on the basis of actual data of the last seven months (April-October) in the fiscal 2017-18 and extrapolated for the next five months (November-March) on the basis of that. "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. The latest data comes weeks before the union budget for 2018-19 is presented in Parliament on February 1 and is expected to put pressure on the government to step up spending in key sectors such as the farming.

"Nominal GDP growth is expected at 9.5%".