India's GDP Growth Hits Three-Year Low in June quarter

India's Gross Domestic Product (GDP) slipped to 5.7% between April to June in 2017, making it the slowest pace recorded in last 13 quarters.

Meanwhile, Quarterly GVA with basic price at constant (2011-2012) prices for Q1 of 2017-18 was estimated at Rs. 29.04 lakh crore, as against Rs. 27.51 lakh crore in Q1 of 2016-17, showing a growth rate of 5.6 percent, stated an official release published by the Central Statistics Office (CSO) noted. The sector's growth fell steeply to 1.2 per cent in the June quarter, compared to 10.7 per cent in the same quarter a year ago.

The expansion in gross domestic product (GDP) was 6.1 per cent in the preceding quarter and 7.9 per cent in the same period last fiscal.

Construction grew by 2% in April-June as against 3.1% in the same period last year, while Public administration, and other services grew by 9.5% in the assessed quarter against 8.6% growth last year. Hence, the first quarter growth this year of 5.7 per cent implies 2.3 percentage points of growth has been lost due to demonetisation.

ICRA principal economist Aditi Nayar said the combination of lower volumes and higher discounts offered to reduce inventories ahead of GST, and the turnaround in average WPI inflation weighed upon the manufacturing.


The sectors that registered strong growth were the ones that did well after demonetisation: financial services grew at 6.4% while trade, hotels, transport and communication grew 11%. Core sector growth data slowed down to 2.4 per cent in July. Jaitley said that most manufacturers were destocking and thier sales cont to increase, leading to an improvement in the services growth. Manufacturing and industrial production majorly impacted the GDP figures as it was expected after the demonetisation drive. "I would expect GDP for the full year will be somewhere closer to 6 percent".

"Principally, the major sector that has seen a sharp decline in industry", he said.

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.

Using the new bankruptcy law, the central bank has prodded banks to initiate insolvency proceedings against 12 large corporate defaulter to resolve Rs 2 lakh crore or nearly a fourth of the country's bad debt.

Stating that results of the proceedings against major debtors would dictate how the banking situation improves, he said the process will take time. "However, we are confident that this effect will wane off in coming months", said Pankaj Patel, President, Federation of Indian Chambers of Commerce and Industry (Ficci).


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