Pre-GST destocking by industry caused drop in Q1 GDP: Arun Jaitley

Manufactuing has gone down to 1.6% from over 3% growth in the previous quarter, says Arun Jaitley

The fall in India's GDP growth in the first quarter of the current fiscal is the result of the de-stocking of inventories by industry in anticipation of the GST, which process is ending and manufacturing is expected to pick up from the current quarter, Finance Minister Arun Jaitley said on Wednesday.

"Manufactuing has gone down to 1.6 per cent, from over 3 per cent growth in the previous quarter," Jaitley told reporters here following the release of the GDP numbers for the April-June quarter by the official statistician.

India's economic growth rate in the first quarter of the current fiscal ended June fell to 5.7 per cent, as compared with 7.9 per cent in the same period a year ago, official data showed on Thursday.

According to data from the Central Statistics Office (CSO), India's gross domestic product (GDP) for the first quarter at Rs 31.10 lakh crore also registered a sequential fall compared with the 6.1 per cent growth in the fourth quarter of the 2016-17. This was the lowest quarterly GDP growth recorded in the three years of the Narendra Modi government.

"That manufacturing has fallen is essentially due to the anticipatory impact of GST (Goods and Services Tax). Since it came in July, most manufacturers were de-stocking," he said, noting that services growth had, however, improved during the quarter in question.

"De-stocking of the manufacturing sector seems to have been completed, so the dip in manufacturing could be bottoming out from this quarter," he said.

"Gross fixed capital ratio turned positive, investment improved...services improved," during the first quarter, he added.

Earlier, Chief Statistician T.C.A. Anant told reporters the principal reason for the decline in growth is a fall in manufacturing sector which saw a growth of 1.6 per cent during the quarter.

"Principally, the major sector that has seen a sharp decline in industry," he said.

"The major reason for slowdown in growth at 5.7 per cent is on account of manufacturing, where gross value added (GVA) is largely contributed by the private sector. In all, 74 per cent of the GVA comes from corporate sector. Its performance has been poor, though the sales growth is good," he added.

He also said the slowdown in the first quarter to 5.7 per cent was due to de-stocking by firms as caution ahead of the GST roll-out on July 1.