Pulled down by sluggish manufacturing, growth in the Indian economy during the first quarter of this fiscal fell to 5.7 per cent, clocking the lowest GDP growth rate under the Narendra Modi dispensation, official data showed on Thursday. Industry expressed disappointment at the numbers, saying it anticipated a rebound from the ongoing quarter.
The previous low of 4.6 per cent was recorded in January-March 2014.
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 grew 5.7 per cent over the same quarter last year. During the previous quarter the GDP had grown by 6.1 per cent.
The country's GDP had grown at 7.9 per cent in the same period a year ago.
"GDP at constant (2011-12) prices in Q1 of 2017-18 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 per cent," a CSO release here said.
In terms of Gross Value Added (GVA), which excludes indirect taxes and subsidies, the growth was even lower at 5.6 per cent over the GVA for the corresponding quarter of last year.
The principal reason for the decline in growth is a fall in manufacturing sector, where GVA fell sharply to 1.2 per cent, from 10.7 per cent a year ago, Chief Statistician T.C.A. Anant told reporters here after the release of the numbers.
"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 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.
Anant 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.
He said there was a likely revival from the second quarter onwards as subsequently stocks would be restored to normal levels as the GST regime progressed.
The GVA in manufacturing was showing a declining trend from Q2 of the last fiscal, which has continued, he added.
Anant noted that another reason for the fall in growth rate was rise in costs on account of prices in intermediate inputs, which has been much higher than last year.
He said services and crop production have seen an increase in the first quarter.
The financial, insurance, real estate and professional services sectors also slowed to 6.4 percent in the April-June quarter from 9.4 per cent a year ago.
Activities that registered growth of over 7 per cent in the first quarter were trade, hotels, transport and communication and services related to broadcasting, public administration, defence and other services and electricity, gas, water supply and other utility services.
Growth in agriculture, forestry and fishing, mining and quarrying, manufacturing, construction and financial, insurance, real estate and professional services is estimated to be 2.3 per cent, (-)0.7 per cent, 1.2 per cent, 2 per cent and 6.4 per cent, respectively, during this period.
Finance Minister Arun Jaitley also blamed the fall in growth on the de-stocking of inventories by industry in anticipation of the GST and said this process is ending and manufacturing is expected to pick up from the current quarter.
"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," Jaitley told reporters here, 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.
India Inc on Thursday expressed disappointment over slowing down of India's GDP growth to 5.7 per cent in the June-ended first quarter of the current fiscal, as the industry was anticipating a rebound from low growth numbers.
"Growth numbers indicate a moderation in agriculture and industrial sectors. The uncertainty surrounding implementation of Goods and Services Tax (GST) did impact industrial production in the first quarter. However, we are confident that this effect will wane off in coming months," said Pankaj Patel, President, Federation of Indian Chambers of Commerce and Industry (Ficci).
Industry lobby Assocham suggested the policymakers to take urgent steps to revive private investments following the recent push to accelerate infrastructure spending, to improve the business climate and (eventually) less leveraged corporates' and banks' balance sheets.
"Continuous fall in fixed investments, unsolved problem of banks' NPAs (non-performing assets) in India, global policy and political risks and tightening financial conditions on account of deleveraging financial institutions and slowdown in real estate could weigh negatively," the industry lobby said in a statement.
According to Anis Chakravarty, Lead Economist, Deloitte, the fall in the latest growth number was possibly on account of the temporary shocks in combination with an overall slowing of the economy.
"Financial services show a worsening trend, while government-led services have done well with front loading of expenditure," said Chakravarty.