Advance estimates show GDP could fall to 6.5% in FY18

by Frankie Norman January 6, 2018, 1:53
Advance estimates show GDP could fall to 6.5% in FY18

Financial, real estate & professional services will grow by 7.3% in 2017-18 as against 5.7% previous year.

"The growth in GDP during 2017-18 is estimated at 6.5 percent as compared to the growth rate of 7.1 per cent in 2016-17", read a statement issued by the Ministry of Statistics & Programme Implementation.

GDP at current prices - the big macroeconomic number that serves as the foundation for the budget math - is expected to attain a level of Rs 166.28 lakh crore, reflecting a 9.5 per cent growth over the previous year.

More than GVA at constant prices, GVA for agriculture and allied activities at current prices slumped from nine per cent in 2016-17 to 2.8 per cent in 2017-18, which means farm product prices grew a mere 0.7 per cent in 2017-18 as against a rise of 4.1 per cent in 2016-17. In the second quarter, the economy showed signs of revival as the GDP growth rate picked up and stood at 6.3 per cent. Per capita income to fall too India's per capita income, a gauge for measuring living standard, is likely to witness a slower growth of 8.3 per cent at Rs 1,11,782 in FY 2017-18.

GDP had grown by 6 per cent in the first six months of FY18. As the numerator swells and the denominator (GDP at current prices) shrinks, the fiscal deficit is likely to overshoot the target of 3.2 per cent in 2017-18 by a considerable margin.

Chief Statistician TCA Anant said, "The de-stocking disruption caused due to the GST implementation has impacted the full-year GDP estimates".

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.

On the other hand, growth in the "agriculture, forestry and fishing", "mining and quarrying", "manufacturing" and "construction" sectors "is estimated to be 2.1 percent, 2.9 percent, 4.6 percent and 3.6 percent", respectively. Taken together, India's "real" or inflation-adjusted GDP grew 6 percent in April-September. "Therefore, they are not fully factoring in the expected pickup in growth in the later months of FY2018, related to a favourable base effect and a "catch up" following the subdued growth momentum in H1 FY2018", said Aditi Nayar, Principal, Economist at rating agency ICRA.

Despite the poor estimates, the analysts are optimistic about economic growth in 2018-19. The CSO could actually estimate a faster GVA expansion in the final two quarters, implying but for slower-than-expected GST tax revenue collections, overall growth could have been faster. The forecast has been released a little over three weeks before finance minister Arun Jaitley presents the last full-fledged Budget of this government before the 2019 Lok Sabha elections.


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