GDP growth slumps to threeyear low of 5.7%

Demonetisation, preGST stress take toll, govt hopes for rebound

NEWDELHI: India’s economy unexpectedly slowed to a three-year low in the April-June quarter, signalling that business was still hurting from last year’s shock cash squeeze as well as disruptions ahead of the rollout of a new tax regime.

Gross Domestic Product (GDP) grew 5.7% in the last quarter, undershooting market expectations, compared to 6.1% in January-March period. The drop was even sharper when compared to the like-quarter a year ago when GDP expanded at 7.9%, official data released on Thursday showed.

The slowdown suggested the underlying momentum in the economy was still weak, posing a challenge to Prime Minister Narendra Modi’s government that must produce masses of jobs to absorb a million people entering the workforce every month.

“Certainly a matter of concern that first quarter GDP has come down to 5.7% and it’s obvious therefore that it throws up challenge for the economy,” Arun Jaitley said.

The economy lost steam primarily because of a sharp fall in mining, manufacturing and construction sectors, where demand remained muted even nine months after the government decided to scrap about 86% of cash in circulation to fight corruption and counterfeiting.

A rush to clear large inventories ahead of the Goods and Services Tax (GST) rollout also affected manufacturing, Jaitley said, adding that the drawn-down in stocks is complete so the dip in the sector could be bottoming out.