The government on Friday predicted that the Indian economy will grow at 7.1% in 2016-17 lower than the 7.6% growth clocked in the previous fiscal. The slump is mainly due to slowdown in manufacturing, mining and construction sectors.
What is worrying is that at 7.1%, India’s growth is lowest in three years, and also the forecast does not fully account for disruption caused by Prime Minister Narendra Modi’s demonetisation drive.
Though the economic affairs secretary refuted any such apprehensions and said: “Data on demonetisation are purely based on impressions and are anecdotal. In fact, most states show a growth in VAT collections in Nov 2016.”
Releasing the data compiled by the Central Statistics Office (CSO), 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 denotification of notes there is a high degree of volatility in these figures and conscious decision was taken not make projection using the November figure”.
Agriculture, forestry and fishing are expected to expand by 4.1% in 2016-17 from 1.2%.
While manufacturing is expected to slow to 7.4% and construction activities to 2.9%. Mining and quarrying are also likely to slump by 1.8% after recording a growth of 7.4% in 2015-16.
“When the entire global economy is slowing India cannot be an outlier. But given the conditions, the Indian economy is still a bright spot,” said Shaktikanta Das, the economic affairs secretary.
Friday’s GDP estimate is a vital input for finance minister Arun Jaitley’s budget on February1. Until last year, the government’s statisticians would wait for GDP data for the quarter through December before putting out full-year estimates. But the announcement of the GDP estimates had to be made early keeping in mind the advanced budget in 2017.
“Because of the advanced data, CSO has incomplete data from November. So the finance ministry will have to make a guess as far as GDP numbers are concerned,” said former chief statistician, Pronab Sen.
The CSO will release the revised data on February 28.
“These numbers are likely to be revised down when the second estimate is released in end February. However, momentum is expected to stabilize into FY17/18 to 7.6%, on easing cash shortage, lower borrowing costs, pent-up demand and higher public capex spending,” Singaporean multinational banking and financial services corporation, DBS, wrote in a report on Friday.