Skip to main content

India's demonetization "pain" coupled with GST "anxiety" back to the fore following 5.7% GDP growth: Crisil

Nuances of GDP-1
By Our Representative
Following one of the lowest Gross Domestic Product (GDP) growth rates in recent years, 5.7%, in the second quarter of the financial year 2017-18, India’s top rating agency, Crisil, has said that this has brought “demonetisation pain” and goods and services tax (GST) “anxiety” again the fore.
Based on data from the Central Statistical Office (CSO), Government of India, released on Thursday, Crisil says, “Crucially, the government has also revised down gross value added (GVA) growth for the fourth quarter of last fiscal by 50 basis points (bps) to 5.6%, suggesting that the impact of demonetisation on the economy was more than earlier estimated.”
Carried out by chief economic Darmakirti Joshi and economist Adhish Verma, the analysis said, the “slid to 5.7%” in the last quarter “from 6.1% in the same quarter last fiscal” suggests “slowdown”, which is corroborated “with corporate results for the first quarter, which had shown net profits declining for chunk of listed firms.”
The experts add, “The computation of GDP relies heavily on corporate data from the Ministry of Corporate Affairs database. The slowdown reflects sharp deceleration in exports of goods, and some moderation inconsumption growth.”
Nuances in GDP-2
According to Crisil, GVA growth, or the supply-side GDP, which is supposed to be a “truer estimate of underlying economic activity as it doesn't take into account the impact of taxes and subsidies, grew 5.6% in the first quarter, same as in the fourth quarter of last fiscal, but down from 7.9% on-year.”
“The fact that GVA growth in the first quarter was the same as in the fourth quarter suggests waning demonetisation impact was offset by rising anxiety over the GST”, it adds.
“Industrial growth in the first quarter was down to 1.6% compared with 3.1% in the previous quarter, on account of a sharp slowdown in manufacturing growth (1.2% vs 5.3%) and de-growth in mining (-0.7% vs 6.4%)”, the top rating agency says.
The slowdown in industrial growth, says Crisil, was “arguably on account of GST uncertainty, which lead to destocking by retailers and slowdown in the production process.”
The experts further say, “Agricultural growth in real terms, too, slowed to 2.3% from 5.2% in the fourth quarter. Here, it is important to note that despite real growth of 2.3%, nominal agricultural growth was only 0.3%, suggesting that while agricultural output grew, their prices fell.” Real growth is derived by stripping the price impact from nominal growth.
Uptick in investment: "Bodes will for future growth"
Pointing out that it is only the services sector which “anchored overall GVA growth, rising 8.7% from 7.2% on-year”, Crisil says, this was “driven by improvement in two sectors -- trade, hotels, transport and communication, and financial, real estate and professional services.”
Pointing out that “there was mild improvement in investment growth (to 1.6% vs 2.1%, on-year, which pulled up the share of fixed investments to 29.8% from 28.5%”, and this “may be reflective of optimism in the growth recovery in the second half”, Crisil, however, says, “Outlook In an environment of subdued global growth and week investments, India’s GDP cannot grow fast in the short run.”
Hence, Crisil says, it has decided revise its GDP growth forecast down from 7.4% stated earlier for the fiscal 2017-18, though adding, “That said, normal monsoon, softer interest rates and inflation, and pent-up demand (demand postponed due to the demonetisation) will support consumption growth in the remaining quarters.”

Comments

TRENDING

US research: 40% of India's casteist Facebook posts are anti-reservation, anti-Dalit

By Rajiv Shah
A recent American civil society research has found that 40% of India's casteist posts on Facebook (FB) have anti-reservation slant. Asserting that the reservation policy in India is similar to affirmative action in the United States, the research study, titled "Facebook India: Towards The Tipping Point of Violence Caste and Religious Hate Speech", says, this type of hate content on FB is mainly directed against Dalits and Adivasis.

Sanjiv Bhatt paying price for deposing on Modi role in Gujarat riots: Wife Shweta

Counterview Desk
Following the Jamnagar sessions court ordering life imprisonment to former IPS officer Sanjiv Bhatt for his alleged involvement in three decades old custodial death case, his wife Shweta Bhatt has said that he has been sentenced for a “for a crime he did not commit”, even as criticizing the Indian Police Service (IPS) Association, Gujarat, for not standing up for him.

Senior advocates targeted because they took up cases against Amit Shah: Lawyers' NGO

Counterview Desk
The Lawyers Collective (LC), an NGO claiming to promote human rights issues, has expressed surprise at the latest move by the Central Bureau of Investigation (CBI) to register an FIR against the Lawyers Collective (LC), its president Anand Grover and unknown office bearers for alleged violation of the Foreign Contributions Regulation Act (FCRA).

How Gujarat govt imposed curbs on livestock export for 'fear' of losing BJP vote share

By RK Misra*
Insidious are the ways authorities function, preaching one thing, practicing quite another. Administrative muscle-flexing to suit political goals was on display when the BJP-led Vijay Rupani government in Gujarat banned the export of livestock days ahead of Eid. Even the Narendra Modi-led government expressed its intent to confirm it countrywide, but stopped short of doing so.

One of the least peaceful countries, India's global peace ranking deteriorates: Report

By Rajiv Shah
A just-released report has asserted that India's ranking in the Global Peace Index (GPI) is 141st among 163 countries, deteriorating by four ranks in a year. Ranking 163 countries by providing a score to each, the report, prepared by the Institute for Economics and Peace (IEP), headquartered in Sydney, Australia, has found India to be one of the least peaceful nations in the region.

Demand for Bharat Ratna to Dalai Lama as top RSS leader warns China of 'strong' action

Nava Thakuria*
Dharamshala: Indian supporters for a free Tibet have urged the Government of India to confer Bharat Ratna, the country’s highest civilian honour, on the Tibetan spiritual leader, the 14th Dalai Lama, for his “immense contributions” in creating goodwill for India in the last six decades. A declaration, adopted at the 6th All-India Tibet Support Groups’ Conference held on June 15 and 16 in Dharamshala township of Himachal Pradesh, said that the Nobel laureate continues to be a holy ambassador of Indian culture enriched with non-violence, compassion and religious harmony.

Sabarmati 'cleaned up' swimming pool style: Untreated effluents discharged in river

Counterview Desk
In a fresh letter to the secretary, Ministry of Environment, Forests and Climate Change (MoEFCC), Government of India, senior Gujarat environmentalists Rohit Prajapati and Krishnakant of the Paryavaran Suraksha Samiti (PSS) have taken strong objection to the recent clean-up drive of the about 11.3 km stretch of Sabarmati riverbed undertaken by the Ahmedabad Municipal Corporation (AMC), terming it as “swimming pool type clean-up.” The river’s total length is 371 km.

Jharkhand mob lynching: Adivasis protest police 'inaction', FIR against victims

Counterview Desk
The Jharkhand Janadhikar Manch (JJM), a civil rights network, on Monday sponsored a protest against the police action against the Adivasi victims of the lynching which took on April 10, 2019, in Jurmu village of Dumri block in Gumla district of Jharkhand. The incident led the death of Prakash Lakda, aged 50.

Gujarat govt 'considers' temples, charitable institutions as shops and establishment

By Pankti Jog*
The Gujarat state assembly recently passed a new law which would "govern" the working condition of shops and establishments. One of the most talked about provisions of the Act is, it allow shops and establishments across Gujarat to function 24 hours.

There is no 'separate' Kashmir story, as there is for Afghanistan, Nepal, Tibet, Palestine

By Mohan Guruswamy*
Kashmir is the northernmost geographical region of South Asia. Until the mid-19th century, the term "Kashmir" denoted only the valley between the Great Himalayas and the Pir Panjal mountain range. The name Kashmir derives from the Sanskrit Kashyapmeru. The Greeks knew it as Kaspeiria. Herodotus called it Kaspatyros.