Slump in Q1 GDP growth due to GST rollout: Arun Jaitley
New Delhi: Union finance minster Arun Jaitley on attributed the lower GDP growth in Q1 to pre-GST destocking of goods and expressed hope that the Indian Economy will grow at 7%, saying that manufacturing has bottomed out.
Jaitley said that improvement in the global economy and good monsoon will aid India GDP growth in the coming quarters which ought to be better if the country is to achieve the annual growth target.
The Economic Survey had projected a growth of 6.75% to 7.5% for 2017-18.
“Global economy is improving faster than what we thought and that is a positive trend. The domestic public investment is certainly going to be quite high because the revenue trend seems to be positive. On the same rationale, with reforms continuing, the confidence in the economy globally being high, the FDI (inflow) will continue. The monsoon overall—the bigger picture—looks to be good and therefore that should send a positive impact,” Jaitley said. “Another area of possibility is, are we able to get early successes for the banking system for the insolvency itself.”
Terming the Q1 GDP growth data as a matter of concern, the finance minister said the government requires both in policy and investment to work more to improve this figure.
The detailed analysis shows that whereas the agriculture is in the normal range, the manufacturing has bottomed out to 1.6% from 3.1%. The investment and services have improved, he said, adding the decline in manufacturing is because of GST impact.
“Since it was announced that GST would come into operation from 1 July, most manufacturers were de-stocking during the April-June period. As a result, trading went up because sales were taking place but it was stocks which were being sold. No new manufacturing happened,” he said.
This seems to be the pre-GST impact of destocking and that seems to be the most predominant reason, other factors could have also contributed, he added.
When asked about whether GDP growth in 2017-18 will reach 7%, Jaitley said: “I’m hopeful, because of the pre- GST destocking, this would really be the bottoming out.”
Earlier, economic affairs secretary S.C. Garg said the growth is expected to improve in the next few quarters. “Demonetisation, GST were the measures that impacted economic activities in the past 6-7 months. Those (demonetisation and GST) have reasonably played out now and from next quarter onwards, we would see the positive implication and impact of these two on GDP growth,” Garg said.
India is sitting in a quarter where economy has started turning the corner, he added.