GDP growth slips to lowest in 3 years

India’s economy grew by 5.7% in terms of Gross Domestic Product (GDP) during the first quarter of the current financial year (April-June) while the new growth parameter, Gross Value Added (GVA) came at 5.6%, highlighting the adverse impacts of several factors, with disruptions associated with introduction of Goods and Services Tax (GST) being the most direct and immediate cause.

The fall in economic growth comes at a time when expectations were riding high of India overtaking China’s growth. China reported a quarterly growth of 6.9% for April-June period, overshooting its own estimates.

As per the data released on Thursday by the Central Statistics Office, India’s economy grew at a slowest pace in over 13 quarters, raising questions about the Reserve Bank of India’s prediction of 2017-18 GVA growing by 7.3% topping previous year’s 6.6%, as per the annual report released by the banking sector regulator just a day before.

The first GDP quarter growth figures contrast sharply against the 7.9% growth in the corresponding quarter in 2016 and 6.1% growth reported in January-March.

What factors contributed to these not-so-enviable growth figures? Extreme destocking, disruption in production schedules and discounts offered ahead of the implementation of the GST could be the major reasons, apart from …read more