GST impact in Q1 will pull down GDP for whole year

The note comes days after the Central Statistical Office came out with its advanced estimates of growth for FY18 suggesting a slowdown in GDP expansion to 6.5% the lowest in four years

In the first half (April-September) of the financial year ending 31 March, the economy grew at 6%, indicating that it will accelerate in the second half (October-March) of the financial year.

The overall GDP growth rate projected was lower than what was forecasted by the Economic Survey in the range of 6.75-7.5 per cent and this gives a reason to analysts for believing that because of these statistics and the fact that if projections of the International Monetary Fund come true, India might lose the tag of being the fastest-growing large economy to China.

Meanwhile, agriculture is expected to grow by a mere 2.1 per cent this fiscal, while manufacturing is estimated to expand by 4.6 per cent. "Confirms strong turnaround of the economy", economic affairs secretary Subhash Chandra Garg said in a post on Twitter.

The government's statistics wing will have data only for additional one or two months than what it had for its second quarter (July-September) GDP estimate to make the full-year GDP growth projection.

According to Chief Statistician T.C.A. Anant, the de-stocking disruption caused due to the GST implementation has impacted the full-year Gross Domestic Product (GDP) estimates.

Manufacturing: Manufacturing is likely to decelerate sharply to grow at 4.6%, compared with 7.9% a year ago.

The estimate will play a crucial role in the finance ministry before presenting the Budget 2018 on February 1.

The first advance estimates show nominal GDP at Rs 166.3 lakh crore, a 9.5% increase over past year.

Unfazed by the official GDP figures showing that the Indian economy will grow at a slower pace compared to the last fiscal, NITI Aayog Vice Chairman Rajiv Kumar said the GDP growth will become more robust in 2018-19. The economy grew at 7.1% in 2016-17. This is less than half of the last year's growth rate of 4.9%.

The GDP data could be revised upwards as the current projections are based on incomplete output and corporate income data, amid signs that people are buying more goods and companies are adding new capacities to meet growing demand.

The Gross Value Added (GVA) has been projected to be at 6.1 per cent versus 6.6 in the previous year.

"Q3 numbers should be higher than 6.5 per cent and Q4 numbers will be close to 7 per cent", Debroy said. It was also 0.1 per cent higher than the consensus forecast from a poll of city economists.

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