India first quarter economic growth slips to 5.7%

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Thursday's data by the Central Statistics Office (CSO) showed that India's "real" or inflation-adjusted GDP grew at its slowest pace in 13 quarters and is still a long way off from returning to an 8 percent growth path, last seen in 2015-16. "But the demonetisation mistake and inadequate performance of the export sector means that the overall performance has been disappointing".

The gross domestic product (GDP) numbers for the April-June quarter of the current fiscal (2017-18) show how economy unexpectedly slowed to a three-year low of 5.7% as against a 7.9% growth in the same quarter last year. Last year, India's cash to GDP ratio (12.2%) - an indicator of the amount of cash used in the economy - was much higher than developed economies including the US, UK and Europre but below Japan (around 18%). The official growth figures "undershot our, and market expectations, by a considerable degree", Aditi Nayar, principal economist at rating firm ICRA, told AFP. In all, 74 per cent of the GVA comes from corporate sector.

"(The) rupee is now really hurting growth", said Pronab Sen, the former Chief Statistician of India and now a country director for think-tank International Growth Center. Financial services sector growth was 6.4 percent compared to 9.4 percent a year ago. The Indian economy is expected to grow 6.2 percent for the whole of FY2018, according to ANZ. Some economic disruption from the GST was expected this quarter, as businesses prepared for the onset of the new tax regime from July 1.

Thus, demonetisation and GST both had their share of impacting India's GDP growth in Q1FY18. The lingering impact of demonetisation, as well as the effect of RERA, is visible in the low 2.0% growth of construction, she added.

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Congress is planning to rally other opposition parties to launch a joint campaign against the Modi government on the demonetisation "disaster" and the subsequent slowdown in the economy.

"The major reason for slowdown in growth at 5.7 per cent is on account of manufacturing, where Gross Value Added (GVA) is largely contributed by the private sector".

India's fiscal deficit at July-end touched 92.4 per cent of the Budget mainly because of front-loading of expenditure by various Government departments. Even on a sequential basis, the Gross Domestic Product (GDP) growth was 6.1 per cent in the preceding quarter.

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