GDP growth seen slowing down to four-year low at 6.5% in 2017-18

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The Indian government has lowered its forecast for the current year’s economic growth on Friday before Finance Minister Arun Jaitley presents his annual budget next month.

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FILE PHOTO: THE HINDU

A forecast by Ministry of Statistics said in a statement that gross domestic product was now estimated to grow an annual 6.5 percent in 2017/18, slower than a provisional 7.1 percent growth in 2016/17, reported Reuters.

This despite Jaitley earlier estimating the economy to grow around 7.5 percent in the 2017/18 fiscal year, generating enough tax to keep the fiscal deficit at 3.2 percent of GDP after meeting spending targets.

The Indian economy has been badly hit by two key economic decisions, the demonetisation announcement and the roll-out of the GST, of Prime Minister Narendra Modi.

Most private economists have pared the growth forecast to 6.2 to 6.5 percent for this fiscal year, citing the teething troubles faced by businesses during the roll out of a goods and services tax (GST).

“The GST transition impact is clearly visible,” Reuters quoted Shubhada Rao, chief economist at Yes Bank.

Rao added, “Given the recent uptick in inflation pressure and with inflation likely to remain around 5 per cent going ahead, we expect the RBI to be on hold with a guarded stance even though growth estimate has disappointed slightly.”

Ranen Banerjee, Partner of Public Finance and Economy at PwC India said the advanced estimates for annual growth of 6.5 per cent can be achieved if there is an average of 7 per cent growth in the last two quarters.

“Given the momentum seen in the core sector growth, PMI indices and developed world economies, the optimism may not be belied. Further wearing off of the demonetisation related residual effects as well as progressively stabilising transitionary effects of GST is likely to support the higher growth rate estimates for the last two quarters. If the economy grows at 6.8 per cent in Q3 and 7.2 per cent in Q4 supported by base effects, we are likely to achieve the CSO advance estimates. Crude prices could be the only story spoiler,” he swas quoted by moneyguru.com.

 

 

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