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India GDP growth slumps to 5.7% in Q1, hit by GST implementation

LiveMint logoLiveMint 31-08-2017 Asit Ranjan Mishra

India’s economic growth decelerated to 5.7% in the June quarter of financial year 2017-18 against 6.1% in the preceding quarter on the back of destocking activities undertaken by the manufacturers ahead of Goods and Services Tax (GST) implementation.

Manufacturing clearly impacted by uncertainty surrounding GST dipped to 1.2% from 5.3% in the previous quarter. However, construction activities revived marginally from the negative print (-3.7%) in the March quarter to 2% in June quarter. Trade, hotel transportation impacted by demonetization in the March quarter (6.5%) revived to grow in double digit 11.1%.

The second volume of the Economic Survey released earlier this month said a raft of deflationary impulses is weighing on the Indian economy, which is likely to fall short of the 7.5% upper band of its forecast growth range this year. The first volume of the Economic Survey released in January had projected the economy to grow in the range of 6.75-7.5% in 2017-18 against 7.1% in 2016-17.

The Survey warned that with monetary policy having been tighter than assumed and the rupee having appreciated against the dollar, the balance of risk has shifted to the downside and it is unlikely that the upper band of the projected growth rate will be achieved.

The central bank’s annual report released on Wednesday reiterated its forecast for gross value added (GVA) to grow at 7.3% in 2017-18, as against 6.3% in 2016-17.

However, at the same time, the report flagged risks such as over-leveraged corporate sector and stressed banking sector, because they could delay private investment demand revival. It also noted that farm loan waivers could add to upward pressures on inflation.

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