India’s GDP growth at 6.3 per cent in September quarter is underwhelming but expected
The much-hyped gross domestic product (GDP) growth rate for the September quarter of the fiscal year 2017-18 has been announced officially and it’s at a dismal 6.3 per cent. Though relatively better than the last quarter’s growth rate – a mere 5.7 per cent for the June quarter – it’s still underwhelming, and is likely to limit the average annual GDP growth rate to 6.5 per cent at most.
The relatively low improvement can be attributed to the impact of the Goods and Services Tax (GST) rollout on July 1 this year, which caused a flurry of confusion among business owners, particularly the SME (small and medium enterprise) entrepreneurs. The GVA, or the Gross Value-Added growth, was estimated at 6.1 per cent, which is marginally better than 5.6 per cent in the previous quarter of June this year.
At a press conference, the chief statistician of India of the Central Statistics Office (CSO) and secretary, Union ministry of statistics and programme implementation (MoSPI), TCA Anant, gave a detailed explanation of the Q2 growth rates, emphasising various aspects of the economic indicators. Secretary Anant underlined the upward trend in the growth curve after five quarters of successively low GDP growth rate figures, which he said was “very encouraging”.
Business journalists and economists have noted that the agriculture GVA has slowed to 1.7 per cent in the September quarter (or Q2 of the 2017-18 fiscal year), from 2.3 per cent in the previous quarter of April-June, or Q1. However, manufacturing GVA has registered better growth at 7 per cent in Q2, a remarkable acceleration from just 1.2 per cent in Q1.
The September quarter data has been announced at a time when India’s fiscal deficit at the end of October has touched 96.1 per cent of the budget estimate of 2017-18, according to Mint.
According to the official statement of the government:
“GDP at constant (2011-12) prices in Q2 of 2017-18 is estimated at Rs 31.66 lakh crore, as against Rs 29.79 lakh crore in Q2 of 2016-17, showing a growth rate of 6.3 percent. Quarterly GVA at Basic Price at constant (2011-12) prices for Q2 of 2017-18 is estimated at Rs29.18 lakh crore, as against Rs 27.51 lakh crore in Q2 of 2016-17, showing a growth rate of 6.1 percent over the corresponding quarter of previous year.”
Sectors that recovered
The economic activities which registered growth over 6 per cent in Q2 of 2017-18 over Q2 of 2016-17 include manufacturing (7 per cent), electricity, gas and water supply, utility services, hotels, transport, communication and broadcasting services, among others, as per Anant. He also said that GVA might turn out to be higher after taking into account the implementation of GST.
The PIB statement says: “With the introduction of Goods and Services Tax (GST) from 1st July 2017 and consequent changes in the tax structure, the total tax revenue used for GDP compilation include non-GST revenue and GST revenue based on GSTR filings as provided by Central Board of Excise and Customs, Department of Revenue, Ministry of Finance. Data used for Q2 of 2017-18 is based on data reported as on date.”
The year-on-year (YoY) and quarter-on-quarter (QoQ) comparisons have shown expected differences, owing to the twin impacts of demonetisation in November 2016 and GST in July 2017. For example, industries with construction growth showed 5.8 per cent in Q2 versus 1.61 per cent in Q1 (QoQ), and 5.9 per cent YoY. Services without construction saw 7.1 per cent versus .72 per cent QoQ and 7.8 per cent YoY.
The drop in agricultural performance to 1.7 per cent from 2.3 per cent QoQ and 4.1 per cent YoY has been attributed to non-crop segment. The PIB statement says: “The growth in the ‘agriculture, forestry and fishing’, ‘mining and quarrying’, ‘construction’ 'financial, insurance, real estate and professional services' and ‘Public administration, defence & other services’ is estimated to be 1.7 percent, 5.5 percent, 2.6 per cent, 5.7 percent and 6.0 percent respectively, during this period.”
GDP recovery before Gujarat polls
The “upward swing” in the GDP growth rate figures has been touted as a crucial electoral balm from the government at the time of the ongoing Gujarat Assembly poll campaign. The Opposition has been taking the Centre to the cleaners over growing economic anxiety and political opponents like Rahul Gandhi have been drawing attention to the economic adventurism of the Modi government through both their campaign speeches as well as sharp, well-articulated tweets.
Therefore, the BJP ministers and leaders have all been pressed to tweet positively, latching on to the “encouraging” development in the GDP growth rate, underwhelming though it is, compared to 7.5 per cent exactly a year back. Collectively, they are trending the hashtag #IndiaUnstoppable to drive home the point and offset the heavy criticism from the Opposition and media.
Evidently, the BJP-led government is pushing the envelope to regain the narrative on economy and development, and the mild rise in GDP growth rate, on the back of really low global oil prices as well as a manufacturing sector really trying hard to recover despite the demonetisation misadventure and the tangled GST digital red tape, is being fronted as PM Narendra Modi never leaving the growth plank.
No wonder then the Opposition is highlighting the fact that 6.3 per cent is “far below the promise of the Modi government and the potential of a well-managed Indian economy”, to quote P Chidambaram, former Union finance minister in the UPA regime.
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