Both manufacturing and agriculture sector has seen growth slowing down.
Niti Aayog Vice Chairman Rajiv Kumar today said India's economic activity has been picking up for the last three quarters and the country's GDP growth will become more robust in 2018-19.
Kumar was reacting to the growth estimates of 2017-18 released by the Central Statistics Office (CSO) today. "The second half GDP growth in 2017-18 has risen to 7%, bringing the annual growth rate to 6.5%...GDP growth will become more robust in 2018-19," he said. The Niti Aayog vice chairman pointed out that economic activity has been picking up over the last three quarters and can be expected to strengthen in the coming period with the manufacturing PMI now reading at a five-year high and FMCG demand going up.
He added that estimates assume significance in the wake of the fact that the higher second half growth has come despite a weaning of public sector expenditures which had peaked in 2016-17 on account of the implementation of the recommendations of the 7th Pay Commission. According to CSO data, economic growth is expected to slow to a four-year low of 6.5% in 2017-18, mainly due to poor performance of agriculture and manufacturing sectors. The Gross Domestic Product (GDP) was 7.1% in 2016-17 and 8% in the preceding year. It was 7.5% in 2014-15.
The growth of gross value added (GVA) in manufacturing sector too is expected to decelerate to 4.6% this fiscal, down from 7.9% in 2016-17.
As regards the farm sector, the expansion in activities in agriculture, forestry and fishing sectors is likely to slow to 2.1% in the current fiscal from 4.9% in the preceding year.
"Is there an impact of the GST (Goods and Service Tax) on average growth? The answer is, to some extent, of course and I explain why," Chief Statistician T C A Anant told reporters after the Central Statistics Office released advance estimates of national accounts today.
Elaborating further, he said, "When we did the first quarter estimates, we had explained this that because of fact that the GST is going to be implemented from July 1, there will be natural anticipation of GST...by the manufacturing sector. Since the first quarter is part of whole year, the manufacturing includes the first quarter as part of it. Yes that impact is built into the exercise."
Commenting on the CSO estimates, Economic Affairs Secretary Subhash Chandra Garg said GDP growth forecast of 6.5% for 2017-18 implies growth of 7% for the second half of the fiscal.
"(This) confirms strong turnaround of economy. Investment growth of almost twice of last years indicate investment reviving," he said in a tweet.
About the agriculture sector, Chief Statistician Anant said, "So far agriculture is concerned, there is certain amount of statistical base reversion to mean, which is seen because last is very high growth rate after continuous years of drought."
He further said, "Actual total production figure would be the second highest in very long period of time. This is not unusual growth rate of agriculture in a good year." On recovery, Anant explained that the growth in the first and second quarters were estimated at 5.7% and 6.3%, respectively and for rest of year, it is worked out at 7%, indicating an increasing trend.
The growth of real Gross Value Added (GVA) in 2017-18 is anticipated at 6.1% as against 6.6% in the previous year.
Economic activities were affected by demonetisation announced on November 8, 2016 and subsequent implementation of a new indirect tax regime (GST) from July 1 in the current financial year.
A barometer of investment, Gross Fixed Capital Formation (GFCF) at current prices is estimated at Rs 43.84 lakh crore in 2017-18 as against Rs 41.18 lakh crore in 2016-17.
At constant (2011-12) prices, the GFCF is estimated at Rs 37.65 lakh crore in 2017-18 as against Rs 36.02 lakh crore in 2016-17.
CII Director General Chandrajit Banerjee said it is heartening that gross fixed capital formation is on a recovery path, as a turnaround in investments is imperative for a sustained recovery to take hold.
According to the CSO, the sectors which registered growth rate of over 7% are: public administration, defence and other services; trade, hotels, transport, communication and services related to broadcasting; electricity, gas, water supply and other utility services; and financial, real estate and professional services.
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