Two homes for the Narendra Modi government on the economic front for so many days. The first RBI annual report showed that the bold demonization movement did not apply to the Modi government as expected. And yesterday, official GDP data showed that the growth rate was 5.7% for the quarter from March to June 2017.
It was 7.9 percent in the same quarter last year.
However, the decline in growth rate was speculated after demonetization, the government argued that this would not affect the growth rate.
Former Prime Minister Manmohan Singh predicted a two percent drop in the GDP growth rate after demonetization. The decline in GDP growth improved its outlook.
THE GDP DECLARES BY THE LAW OF THE VI QUARTER
By the end of 2015, India had emerged as the fastest growing global economy.
In the first quarter of 2016 – the period from January to March – the GDP growth rate was 9.2%. This has led to the aspiration that India could achieve a double-digit growth rate.
However, from January to March 2016, the GDP growth rate declined steadily. In April-June 2016, the GDP growth rate was 7.9%, 1.3% less than in the previous quarter. It declined from more than 7.5% during the quarter to September 2016. The demonstration has not yet been announced.
Seasonalization hit the country on 8 November from mid-September to December 2016, with a growth rate of 7.0% of GDP. After demonization, the first quarter of January to March this year recorded a GDP growth rate of 6.1 – a sharp decline of almost 3% compared to the previous year.
Taking Twitter, economist Ajit Ranade said: “1 percent of annual GDP growth lower = loss of 1.5 lakh crore national income and loss of millions of jobs.
Ranade also wonders why, despite “favorable” macroeconomic factors, including low inflation, manageable budget deficits, a stable rupee, many foreign currencies, record foreign investment gains, low oil prices, 5.7% in April-June.
ARE THESE FIGURES FINAL?
The latest data on GDP growth are not the last, as they will adjust over the next two years. This does not include data from unorganized sectors that have been severely affected by demonetization.
Unorganized sectors account for about 45% of the Indian economy. Collecting data from unorganized sectors takes from two to three years.
Only then would real GDP figures be available. Given the shock that demonization has given to unorganized sectors, GDP figures are likely to go further.
MANUFACTURING DECLINATION AND GST
The manufacturing sector has achieved the lowest growth rate in five years. The manufacturing sector registered a growth rate of 1.6%, compared to 3.1% in the previous quarter.
The decrease in manufacturing is attributed to the reform of the tax on goods and services (GST). The government had announced several months in advance that the GST would be implemented from 1 July.
This has been done to facilitate the transition process, but this has led to the decomposition of manufacturers during the period from April to June.
As a result, trade increased during the period when sales moved north to the reimbursement account. But from April to June, most of the actions were unlocked. The new manufacture was not carried out.
USING THE DECLARED CAPACITY
In addition to the paralysis of GST production in the sector, manufacturing also suffered a decline in capacity utilization. An RBI report, released in March this year, indicated what was in store for the manufacturing sector.
The use of capacity is understood as a measure of the extent to which a company’s productive capacity is used. This is the percentage of the total capacity of the entity actually reached in a given period.