India’s economic growth plunged to 5.7 per cent in the first quarter of FY18, underlining the disruption in economic activity caused by demonetisation and the shift to the goods and services tax (GST) regime. Gross domestic product (GDP) had grown by a healthy 7.9 per cent in the first quarter of FY17, as shown in Chart 1.
Excluding government spending, gross value added (GVA) grew at five per cent, as shown in Chart 2, highlighting the sluggishness in economic activity. But core GVA, which excludes both agriculture and government spending, rebounded from the low of 3.8 per cent in Q4FY17 to 5.5 per cent in Q1FY18.
Manufacturing activity slumped to a low of 1.2 per cent in Q1FY18, down from 5.3 per cent in the previous quarter, indicating destocking by companies ahead of the shift to the GST. On the other hand, sectors such as trade, hotel, transport, communication, financial services, insurance, and real estate & professional services registered an uptick in Q1FY18, as shown in Chart 3.
On the expenditure side (Chart 4), both private and government consumption grew at a slower pace in Q1FY18 than in Q4FY17. The silver lining in the data, if it can be called that, is that gross fixed capital formation, which had contracted in the previous quarter, registered a rise, growing at 1.6 per cent in the first quarter (Chart 5).
Interestingly, as shown in Chart 6, valuables grew by a staggering 204.8 per cent. This, as some have suggested, is presumably on account of gold stocking ahead of the shift to the GST.
After the first quarter data, economists have rushed to revise their growth projections for FY18 downwards. As shown in Chart 7, they have now been lowered to 6.8 -7.3 per cent range, from the 7.1-7.8 per cent range earlier.
StatsGuru is a weekly feature. Every Monday, Business Standard guides you through the numbers you need to know to make sense of the headlines. Compiled by BS Research Bureau