Skip to main content

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

Nuances of GDP-1
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

Dalit rights and political tensions: Why is Mevani at odds with Congress leadership?

While I have known Jignesh Mevani, one of the dozen-odd Congress MLAs from Gujarat, ever since my Gandhinagar days—when he was a young activist aligned with well-known human rights lawyer Mukul Sinha’s organisation, Jan Sangharsh Manch—he became famous following the July 2016 Una Dalit atrocity, in which seven members of a family were brutally assaulted by self-proclaimed cow vigilantes while skinning a dead cow, a traditional occupation among Dalits.  

Powering pollution, heating homes: Why are Delhi residents opposing incineration-based waste management

While going through the 50-odd-page report Burning Waste, Warming Cities? Waste-to-Energy (WTE) Incineration and Urban Heat in Delhi , authored by Chythenyen Devika Kulasekaran of the well-known advocacy group Centre for Financial Accountability, I came across a reference to Sukhdev Vihar — a place where I lived for almost a decade before moving to Moscow in 1986 as the foreign correspondent of the daily Patriot and weekly Link .

Boeing 787 under scrutiny again after Ahmedabad crash: Whistleblower warnings resurface

A heart-wrenching tragedy has taken place in Ahmedabad. As widely reported, a Boeing 787 Dreamliner plane crashed shortly after taking off from the city’s airport, currently operated by India’s top tycoon, Gautam Adani. The aircraft was carrying 230 passengers and 12 crew members.  As expected, the crash has led to an outpouring of grief across the country. At the same time, there have been demands for the resignation of Prime Minister Narendra Modi, Home Minister Amit Shah, and the Civil Aviation Minister.

Global NGO slams India for media clampdown during conflict, downplays Pakistan

A global civil rights group, Civicus has taken strong exception to how critical commentaries during the “recent conflict” with Pakistan were censored in India, with journalists getting “targeted”. I have no quarrel with the Civicus view, as the facts mentioned in it are all true.

Whither SCOPE? Twelve years on, Gujarat’s official English remains frozen in time

While writing my previous blog on how and why Narendra Modi went out of his way to promote English when he was Gujarat chief minister — despite opposition from people in the Sangh Parivar — I came across an interesting write-up by Aakar Patel, a well-known name among journalists and civil society circles.

Remembering Vijay Rupani: A quiet BJP leader who listened beyond party lines

Late evening on June 12, a senior sociologist of Indian origin, who lives in Vienna, asked me a pointed question: Of the 241 persons who died as a result of the devastating plane crash in Ahmedabad the other day, did I know anyone? I had no hesitation in telling her: former Gujarat chief minister Vijay Rupani, whom I described to her as "one of the more sensible persons in the BJP leadership."

Why India’s renewable energy sector struggles under 2,735 compliance hurdles

Recently, during a conversation with an industry representative, I was told how easy it is to set up a startup in Singapore compared to India. This gentleman, who had recently visited Singapore, explained that one of the key reasons Indians living in the Southeast Asian nation prefer establishing startups there is because the government is “extremely supportive” when it comes to obtaining clearances. “They don’t want to shift operations to India due to the large number of bureaucratic hurdles,” he remarked.

Guha plans book to counter Dalit, Marxist, and right-wing critics of Gandhi, recalls Modi’s 'pernicious lie' on Patel

Let me first confess: writing about an event three weeks after it has taken place is no good, especially for a newsperson. However, ever since I attended the public lecture by well-known historian Ramachandra Guha on May 18, organised by Sarthak Prakashan for the release of the Gujarati edition of his book monumental book "India After Gandhi", frankly, I kept wondering if he had said anything newsworthy apart from what had already appeared in the media ever since the book's first edition came out in 2007. Call it my inertia or whatever.

Two decades on, hunger still haunts Gujarat: Survey exposes stark gap behind poverty claims

A Niti Aayog report , released about two years ago, estimated that in Gujarat — which our powers-that-be have long considered a model state — 11.66% of people are "multidimensionally poor," a term referring to an index that seeks to estimate "multiple and simultaneous deprivations" at the household level across three macro categories: health, education, and living standards.