Q1 GDP growth at 5.7% lowest in 3 yrs

by Garry Watts September 2, 2017, 0:27
Q1 GDP growth at 5.7% lowest in 3 yrs

India's GDP growth decelerated in the April to June quarter to 5.7 percent amidst a sharp drop in manufacturing activity.

India's economy unexpectedly slowed further to a three-year low in the quarter through June, delivering a blow to Prime Minister Narendra Modi who is facing criticism for disrupting business activity through his shock cash squeeze last year.

"GDP at constant (2011-12) prices in Q1 of 2017-18 is estimated at 31.10 lakh crore, as against 29.42 lakh crore in Q1 of 2016-17, showing a growth rate of 5.7 percent". That's a big drop from the quarter before and much slower than the 7.1% growth it recorded in the same period past year.

Key Indian equity market indices opened flat on Friday after the Central Statistics Office (CSO) data showed that the GDP growth of the Indian economy slumped to 5.7 per cent during April-June. "The pre-GST destocking exercise is bottoming out [.] New manufacturing should begin soon".

Growth in the financial, insurance, real estate and professional services sectors also slowed from 9.4% to 6.4%. Jaitley said that most manufacturers were destocking and thier sales cont to increase, leading to an improvement in the services growth. "I am confident that in the July-September quarter, economy will grow by 7-7.5 per cent".

The government, however, denied any impact of demonetisation, but admitted that the roll-out of GST could have had an impact. However, in the previous quarter the on-year fall was a deeper 3 percentage point.

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The Q1 GDP numbers are concerning the government. the GDP data from Q1 challenges the government to revive and improve the growth rate, he said.

Icra's Aditi Nayar noted that the pace of growth of industry and agriculture was lower than anticipated whereas the service sector's growth exceeded the rating agency's forecast.

Capital investment also rebounded from a 2.1 percent contraction in the March quarter.

Indians have deposited almost all the currency bills outlawed at the end of the deadline a year ago, dealing a blow to Prime Minister Narendra Modi's drive to unearth unaccounted wealth and fight corruption.

The RBI on Wednesday said about 99 per cent of Rs 15.44 lakh crore demonetised currency came back into the system.

Speaking on the GDP data, Khemani said that GST, RERA and demonetisation had a short-term impact on the economy. It raises the likelihood of the Reserve Bank delivering a growth-propping rate cut later this year, some analysts said. Unless there is a pick up in these figures, one can not expect an improvement in the jobs scenario.


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