India's Economy Slowed Last Quarter

India's Economy Slowed Last Quarter

India's Economy Slowed Last Quarter

India's growth slumped to 5.7 percent in the first quarter of the financial year, official data showed on August 31, below predictions as a controversial banknote ban dragged further on the economy. Lower compared to GDP of 6.1% in January - March 2017 (Q4FY17) and 7.9% in April - June 2017 (Q1FY17).

Economic activities that registered growth of over 7 per cent in the first quarter on an annual basis are trade, hotels, transport and communication and services related to broadcasting, public administration, defence and other services and the electricity sector.

On Thursday, The Central Statistics Office (CSO) released the Gross Domestic Product (GDP) figures which trigger an alarming situation for the government of India. The broader consistence expectation was around 6.6 percent and if you see last quarter of the previous year, we closed at 6.1 percent.

The fall in India's GDP growth in the first quarter of the current fiscal is the result of the de-stocking of inventories by industry in anticipation of the GST, which process is ending and manufacturing is expected to pick up from the current quarter, Finance Minister Arun jaitley said on Wednesday. "... With GST now being operationalised, this would be bottoming out as far manufacturing is concerned and probably the curve could turn up", the minister told reporters here.

However, in a silver lining for Asia's third-largest economy, the services sector gathered steam, posting a growth of 8.7 percent in the latest quarter, up from 7.2 percent in the previous three months.

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"The sector that contributed the most to slowing economic growth was manufacturing. The slowdown reflects sharp deceleration in exports of goods, and some moderation in consumption growth", it said.

"According to me, it is partly because of demonetization and partly because it was the last quarter before GST was implemented". Manufacturing and industrial production majorly impacted the GDP figures as it was expected after the demonetisation drive. It admitted that the low GDP wasa challenge for the government in the coming quarters.

Those hopes, however, have been belied as merchandise exports growth has slumped to 3.9 percent year-on-year from near 28 percent growth in March. But the next quarter impact will be of GST (goods and services tax), which will have an adverse impact on growth overall. Unless there is a pick up in these figures, one can not expect an improvement in the jobs scenario.

"One per cent decline in GDP is a loss of Rs 1.5 lakh crore".

Prime Minister Narendra Modi announced last November the withdrawal of high-value bank notes constituting 86% of the currency in circulation to dredge up illegally stashed wealth. "We need fewer but stronger banks", he said.

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