Expect weak growth of 6.4% in 2017-18: SBI

Expert sees trouble in 3rd, 4th quarters

After a disappointing first quarter, India’s GDP is expected to grow around 6.4 per cent in 2017-18, according to an SBI Research report. It was last in 2013-14 that the GDP had grown by 6.4 per cent.

World Bank’s former chief economist and former chief economist of India Kaushik Basu said that the downturn in India’s growth is “very worrying”, underscoring that this is the “hefty price” the country has paid for demonetisation.

India’s GDP growth dropped to a three-year low of 5.7 per cent during April-June as manufacturing dipped and the impact of demonetisation lingered on.

“We believe GDP growth in current fiscal will remain weak. The second quarter GDP

Continued from Page 1 numbers are likely to be closer to the first quarter,” said SBI.

“We, however, see GDP growth picking up in the third quarter. In the fourth quarter, the growth is likely to cross 7 per cent. We are hopeful of a better fourth quarter, but that is crucially dependent on the outcome of resolution of stressed assets that falls due in the fourth quarter,” said SBI.

Meanwhile, Mr Basu said 2.3 percentage points of growth has been lost due to demonetisation.

“The downturn in growth is very worrying. I knew it would go below 6 per cent because the demonetisation was a big negative shock to the economy. But 5.7 per cent growth is lower than I expected,” said Mr Basu, the former senior vice president and chief economist of the World Bank.

He pointed out that from 2003 to 2011, India was growing typically over 8 per cent per annum. “Now with oil prices so low, China ceding space to India, our growth should have been back to well over 8 per cent. Hence, the first quarter growth this year of 5.7 per cent implies 2.3 percentage points of growth has been lost due to demonetisation. This is a hefty price,” Mr Basu said.

“But the demonetisation mistake and inadequate performance of the export sector means that the overall performance has been disappointing. These mistakes can be corrected,” he said.

He said unless the government again makes a mistake like the demonetisation, the economy should recover in 2018.

“But I expect two more quarters of poor growth. The October to December quarter, especially, could see a slowdown, since the farmers last year suffered a lot when they discovered that ordinary people’s buying power had been curtailed by the demonetisation and though they had produced a lot, they could not sell. We are likely to see a backlash of that later this year,” Mr Basu said.

“One policy risk is if we try to go digital, doing away with cash too fast,” he cautioned.

Continued from Page 1 Some of the fresh saffron faces that could enter Mr Modi’s Cabinet include Ram Madhav, Murlidhar Rao, Vinay Saharshabuddhe. Names of party MPs, including Prahlad Patel, Suresh Angadi, Satyapal Singh and Prahlad Joshi, are also doing the round for getting a berth in the Modi government. Speculation is rife that from the JD(U) quota, R.C.P. Singh and Santosh Kumar could join the Council of Ministers. The AIADMK is unlikley to join the Cabinet at this juncture.

Ahead of the rejig, five ministers — Rajiv Pratap Rudy, Sanjeev Kumar Balyan, Faggan Singh Kulaste, Mahendra Nath Pandey and Bandaru Dattatreya — have already resigned while two Cabinet ministers, Uma Bharti and Kalraj Mishra, have offered to resign. When asked about her resignation, Ms Bharti, who was in Jhansi, made it clear that only party president Mr Shah or someone on his behalf “could answer that question.” She later tweeted, “I was asked to give my reaction to the news of my resignation, that the media has been playing up since last evening... I replied that I have not heard this question, neither will I, nor will I give an answer for it.”

While Ms Bharti’s camp had been saying that the minister had sometime back offered to resign on health grounds, sources in the BJP said that the saffron sanyasin “is not keen to give up her ministerial berth”. It was further learnt that the party high command was “not too happy with her performance” as the minister of water resources, river development and Ganga rejuvenation.

It was alleged that her performance on Ganga rejuvenation, a pet project of the Prime Minister, was “not as expected”. On the other hand, former minister of state for skill development Rajiv Pratap Rudy, who resigned late on Thursday night, told the media that resigning was not his decision. “It’s the decision of the party and I will follow,” Mr Rudy said.

Sources disclosed railway minister Suresh Prabhu, who had taken moral responsibility for a string of train accidents and indicated his willingness to resign, may be moved to another ministry. “A process has been set in motion for the swearing-in ceremony at Rashtrapati Bhavan at around 10 am on Sunday,” a top government official said.