Data shows GDP may grow at 7.1 per cent, down from 7.6 per cent

New Delhi: India’s GDP slowed down to 7.1 per cent in 2016-17 from 7.6 per cent in 2015-16 due to slump in manufacturing, mining and construction sectors, according to advance estimates released by Central Statistics Office (CSO) on Friday.

However, advance estimates does not fully account for disruption caused by Prime Minister Narendra Modi’s decision to demonetise Rs 500 and Rs 1,000 notes on November 8. This may mean that going forward, there may be further downward revision in the GDP numbers.

The sector-wise estimates are obtained by CSO by extrapolation of indicators like index of industrial production (IIP) of first seven months of 2016-17 and financial performance of listed companies in the private corporate sector available upto quarter ending September, 2016 among others.

Till last year, CSO would wait for GDP data for the quarter through December before putting out full-year estimates.

Chief statistician T.C.A. Anant said the figures for November were available and examined but “it was felt in view of the policy of demonetisation of notes there is a high degree of volatility in theses figures and conscious decision was taken not make projection using the November figure.”

Rating agency ICRA said that it expects GDP at 6.8 per cent, appreciably lower than the advance estimates.

ICRA principal economist, Aditi Nayar, said that advance estimates released by the CSO of growth in FY2017 are unsurprising, as they draw heavily from the available data for the first half of this fiscal, for which GDP and Gross Value Added (GVA) expansion was estimated at 7.2 per cent.

“Given the impact of demonetisation on actual activity from mid-November 2016 onward, projecting GDP growth for the full year by extrapolating the trends up to October 2016 for several sectors may introduce more errors than in earlier years. This would be particularly apt for cash intensive sectors such as construction,” she said.

Deloitte India lead economist Anis Chakravarty said that advance estimate clearly shows a deceleration in economic activity levels in the economy without accounting for the effects of demagnetisation. “However, this decline itself is possibly understated on account of timing and methodology issues. Firstly, by releasing the data a month early, the government’s statistics machinery would have had insufficient data to ascertain the trend in the months after the decision to demonetise. Second, the advance estimates are partially based on extrapolation of existing trends which could have possibly dipped further in November and December,” said Chakravarty.

As per the data released by CSO, agriculture is expected to expand by 4.1 per cent in 2016-17 from 1.2 per cent last fiscal. On the other hand, mining and quarrying is likely to shrink by 1.8 per cent  after recording a growth a 7.4 per cent in 2015-16. Growth in manufacturing is expected to slow to 7.4 per cent from 9.3 per cent.