GDP growth will fall to four-year low of 6.5 per cent in 2017-18

New Delhi: India’s GDP growth is forecast to slow down to a four-year low of 6.5 per cent in 2017-18 as it was hit by demonetisation and the rollout of a chaotic Goods and Services Tax (GST), which was changed repeatedly in the past six months to quell protests by traders and industry.

This is the lowest growth of the Indian economy since Prime Minister Narendra Modi came to power in May 2014, riding high on expectations that he would put India on a high-growth trajectory. The forecast has been released a little over three weeks before finance minister Arun Jaitley presents the last full-fledged Union Budget of this government before the 2019 Lok Sabha elections. The depressing forecast will  put pressure on the government to announce dramatic measures in the Budget to revive the economy, particularly in the rural sector. In 2017-18, the manufacturing sector is predicted to grow by 4.6 per cent, down from 7.9 per cent in 2016-17, as per the first advance estimates released by the Central Statistics Office (CSO) on Friday. The agriculture sector, a major source of employment across the country, will grow by 2.1 per cent in the current fiscal, down from 4.9 per cent in 2016-2017. GDP had grown by 7.1 per cent in 2016-17, 8 per cent in 2015-2016 and 7.5 per cent in 2014-15.

GDP had grown by 6 per cent in the first six months of 2017-18. GDP had grown by 6.3 per cent  in the second quarter (July-September period) of 2017-18 (the latest quarter for which real data is available), after falling for the straight last five quarters, which had raised hopes in the government that the slowdown in the economy had bottomed out. “GDP growth of 6.5 per cent for 2017-18 implies growth of 7 per cent for the second half. It confirms a strong turnaround of the economy. The investment growth of almost twice of last year indicates that investment is reviving,” economic affairs secretary Subhash Chandra Garg said.

The statistics office will release economic growth data for 2017-18’s October-December quarter in February, along with the revised full-year growth estimates.

“The lower GDP growth in FY18 clearly reflects the challenges the Indian economy is facing in terms of maintaining growth momentum. Instead of accelerating from 7.1 per cent, GDP growth is likely to slip. The predominant narrative would be to attribute this slowdown to the adverse impact of demonetisation and implementation of GST. No doubt both these measures have had an adverse impact on GDP growth and were more pronounced in case of the manufacturing sector,” said Sunil Kumar Sinha, principal economist, India Ratings and Research. Mr Sinha said accelerating GDP growth from this level and maintaining it close to 8 per cent will be a tough task even after the economy begins to reap the benefits of GST. “The biggest clog in the wheel is the revival of private corporate investment,” Mr Sinha added.

“Agriculture growth rate slips to 2.1 per cent from 4.5 per cent last year. Farmers hear spin on ‘doubling income’ while the reality is backbreaking and a disaster. Why is MSP, which is their rightful due, not being given?” tweeted CPI(M) general secretary Sitaram Yechury. He alleged farmer suicides in the past three years bears witness to the dismal level the government has pushed them to. “Social harmony and amity are a prerequisite for economic progress too. You can’t polarise a society and spread hate while seeking votes and hope for high economic growth,” Mr Yechury added.