India GDP Growth Fall to 6.1 %
For the Indian government that relied on the tag of 'fastest growing economy' to attract investments in the country, it will now need a new qualifier while pitching India to potential investors.
While reports are quick to blame the Narendra Modi Government for its demonetisation that withdrew 86 per cent of the country's currency from circulation, former PM Manmohan Singh had stated in the Parliament at the time that the move might dent growth by two percentage points or more.
However, India's economy was slowing down much before PM Modi implemented the currency demonetisation last November, reports The Economic Times.
Growth in gross value added output as measured from the economy's supply side has slowed every quarter since last spring. It's down from 8.7 percent to 5.6 percent in the recent figures. The problem isn't just demonetisation, something is wrong with India's growth engine, which looks to be choking, the report added.
'Nobody is investing': The report notes that investment by companies has been down for some time, and is now well below 30 percent. Investments shrank in absolute terms in 2016-17, it said.
Apart from passing a bankruptcy law or giving the RBI powers to force resolutions in the NPA cases, the government hasn't done much to tackle bad loans and mounting debt.
Considering much of Indian investments, even those related to large infrastructure projects are 'routed' through banks, public-sector banks are reluctant to lend as they are struggling with their balance sheets, it said. Bank credit growth has recently spiralled to decade lows.
Even when banks are ready to lend, there are a few takers for funds owing to high-interest rates set by the Reserve Bank of India, companies note. There have been no safeguards by the government to reduce the risk for investors who have been 'burned' multiple times in the past, they added.
Union Finance Minister Arun Jaitley defended the government's scorecard by stating that it inherited the troubles of the previous government and poor monsoons which it had to deal with. It is true that the economy in 2014 was underperforming, and data showed that it was tracking upwards after PM Modi came to power. However, the last monsoon has been an 'excellent' one as evidenced by the strong performance of the agricultural sector, the report said.
India's GDP growth rate for Q4 failed to meet predictions of 7.1 per cent by a Reuters poll of 35 economists. The previous quarter (October- December) witnessed the country's GDP grow at 7 per cent, a TOI report said.
"Q4 data is definitely disappointing and clearly reflects some amount of extreme impact from demonetisation. Based on the quarterly numbers, we can expect a strong commentary from the central bank (RBI) in their next policy meet," Tirthankar Patnaik, India strategist, Mizuho Bank said told TOI. The Reserve Bank of India's (RBI) monetary policy review is due early next month.
Read: Demonetisation effect: India's GDP misses estimates, annual growth slows to 7.1%
During the reporting quarter, the agriculture, forestry and fishing sectors grew at 5.2 per cent; mining and quarrying at 6.4 per cent; manufacturing at 5.3 per cent; electricity, gas, water supply and other utility services at 6.1 per cent; trade, hotels, transport and communication at 6.5 per cent; financial, real estate and professional services at 2.2 per cent; and public administration, defence and other services at 17 per cent. However, the construction sector shrank 3.7 per cent, the article said.
India's GDP is expected to gradually rise to around 8 per cent over the next three to four years, Global rating agency Moody's Investors Service said on May 31.The Indian economy will grow by 7.5 per cent during the financial year ending March 31, 2017 (FY17) and 7.7 per cent in the fiscal year 2018, it said.
While the Goods and Services Tax is expected to add 2 per cent to the country's GDP, economists said the contribution to GDP will happen gradually and the impact will be weighable by FY18.
Following a change in methodology two years ago that transformed a sluggish economy into a 'world-beater' overnight, the report said most economists don't take India's GDP at face value.
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