THE GDP GROWTH PANGS

India Today - - INSIDE - —Sh­weta Punj

It’s not a pretty pic­ture. In­dia’s growth has slowed down. Man­u­fac­tur­ing and agri­cul­ture are strug­gling, the govern­ment’s fi­nances are stretched and tax col­lec­tions are fall­ing. Ad­vance es­ti­mates by the Cen­tral Statis­tics Of­fice put the GDP grow rate at 6.5 per cent in 2017-18, down from 7.1 per cent in the last fis­cal and the low­est since fis­cal 2015. Gross Value Added (GVA)—the value of goods and ser­vices pro­duced—is pro­jected at 6.1 per cent, down from 6.6 per cent in the last fis­cal. Man­u­fac­tur­ing growth is ex­pected at 4.6 per cent against 7.9 per cent in the last fis­cal, and agri­cul­tural growth at 2.1 per cent, com­pared to 4.9 per cent in the last fis­cal.

Econ­o­mists blame the slump on de­mon­eti­sa­tion, tran­si­tory dis­rup­tions caused by the Goods and Ser­vices Tax and poor agri­cul­tural growth. But the worst may be be­hind us. Aditi Na­yar, prin­ci­pal econ­o­mist at ICRA, ex­plains that the ad­vance es­ti­mates are based on limited data and do not fac­tor in the ex­pected pick-up in growth in the later months of fis­cal 2018. ICRA ex­pects the GDP to grow at 6.7 per cent. Crisil ex­pects growth to re­bound to 7.6 per cent in fis­cal 2019 as GSTre­lated is­sues get ironed out and con­sump­tion— helped along by softer in­ter­est rates, lower in­fla­tion and higher pub­lic spend­ing with a ru­ral fo­cus—pow­ers In­dia’s growth. The Rs 2.11 lakh crore bank re­cap­i­tal­i­sa­tion plan could en­able banks to sup­port growth.

Also en­cour­ag­ing is the uptick in vol­umes across sec­tors. Eight core in­dus­tries grew by 6.8 per cent in Novem­ber 2017, from 5 per cent the pre­vi­ous month. Core sec­tor growth had plunged to 3.2 per cent in Novem­ber 2016 af­ter de­mon­eti­sa­tion.

The ser­vices sec­tor is also ex­pected to show sharp growth in the sec­ond half of fi­nan­cial 2018, rid­ing on higher spend­ing by state gov­ern­ments. Data for Oc­to­ber-Novem­ber 2017 shows a sharp in­crease in to­tal ex­pen­di­ture, which will sup­port ser­vices in the third quar­ter. But the limited fis­cal room avail­able with the govern­ment for ad­di­tional spend­ing in the fourth quar­ter could weigh down the sec­tor’s growth.

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