The economic growth of India slipped to a three-year low of 5.7 per cent in April-June as disruptions caused by demonetisation spilled over to the third straight quarter amid slowdown in manufacturing activities. According to the government data, the GDP had expanded by 6.1 per cent in the preceding quarter.
The Q1 GDP is estimated at Rs 31.10 lakh crore, as against Rs 29.42 lakh crore in Q1 of 2016-17, showing a growth rate of 5.7 percent, Ministry of Statistics & Programme Implementation said in a release.
GST, the biggest indirect tax reform since Independence led to destocking activities undertaken by the manufacturers ahead of Goods and Services Tax implementation.
Finance Minister Arun Jaitley blamed destocking by manufacturers during pre-GST period for lower GDP growth numbers, saying it was the most predominant reason for decline in growth.
Finance Minister Arun Jaitley while addressing a press conference said, "GDP data throws up challenges for the economy.” He said the government will improve and revive growth figures. Following demonetisation, the economy is reeling under pressure and still seems to be desperately trying to recover from the note ban. The economy clocked a 6.1 per cent growth rate in the January–March period — its lowest pace of growth in the past nine quarters.
The national income data released by the Central Statistics Office (CSO) for the first quarter is lowest during the Narendra Modi-led government's regime, which assumed office in May 2014.
The previous low of 4.6 per cent was recorded in January- March 2014.
Chief Statistician T C A Anant said 74 per cent of manufacturing GVA comes from the private sector whose performance was poor.
Prices have risen on account of growth in input costs and "very large level of inventory de-accumulation that took place in the first quarter this fiscal", he said while explaining the numbers.
Observing that it will be wrong to link the entire decline in economic activities to demonetisation, Anant said GVA was declining from the second quarter of the last fiscal, much before the November 8 decision of the government to junk high-value currency notes.
Uncertainty about new indirect tax rates under GST prompted a host of industries, including carmakers, FMCG companies and garment manufacturers, to clear their stocks.
"We are certainly concerned (about low growth)," Jaitley said.
Asked about whether the government can grow at 7 per cent in 2017-18, Jaitley said, "I am hopeful because (of) the pre- GST destocking, this would really be the bottoming out."
He further said there are challenges ahead as growth in subsequent quarters will have to be higher to achieve the projected growth target.