India’s economy expanded by 7 per cent surprisingly in the third quarter of this financial year, dispeling the fears that note ban would severely impact the Gross Domestic Product (GDP) growth rate.
The GDP figure is lower than the revised 7.4 per cent expansion in the previous quarter, but is still well above the 6.1 per cent predicted by economists in their poll.
Retaining the growth projection in the country, the Central Statistics Office (CSO) on Tuesday released the growth projection for the current fiscal at 7.1 per cent, as projected in the first advance estimate in January. The CSO also marginally revised upwards the GDP estimates for the first and the second quarters to 7.2 per cent and 7.4 per cent.
Commenting on the CSO report, Economic Affairs Secretary Shaktikanta Das said the third quarter and the 7.1 per cent growth projected for full fiscal are definitely something noteworthy. “We had said that most of the reports were anecdotal, not based on statistics. There were reports that manufacturing activities in many sectors were affected due to demonetisation but as we see from the numbers, manufacturing growth at 8.3 per cent is very satisfying number and promising number,” Das told reporters after the CSO released its figures.
Following the note ban, there was an overestimation done by the people of the country about the so-called negative impact of the demonetisation.
“The third quarter GDP numbers are out and as you have seen the numbers completely negate the kind of negative projections and speculation made about the impact of demonetisation,” Das said.
However, India Inc is hopeful that the economy is getting back on track and reforms are needed to revive investments and push demand hit by the note ban. “The growth is expected to recover in the next financial year. The direction indicated in the Union Budget announced earlier this month is encouraging and will further strengthen the domestic economy. It is extremely critical to push the domestic capex cycle which has been persistently weak,” said FICCI Secretary General A Didar Singh.
While Assocham president Sandeep Jajodia said, “Policymakers should take doable steps to revive fixed investments and production of capital goods which are falling continuously since the growth which is being supported by consumption demand does not have a sustainable impact.”
The Reserve Bank of India (RBI) and other agencies like IMF and OECD had lowered GDP projections arguing that the note ban would have short-term impact on the Indian economy.
Proving it wrong, the CSO said in its statement that Real GDP or Gross Domestic Product (GDP) at constant (2011-12) prices in 2016-17 is likely to attain a level of Rs 121.65 lakh crore, as against the first revised estimate of GDP for 2015-16 of Rs 113.58 lakh crore, released in January 2017. “The growth in GDP during 2016-17 is estimated at 7.1 per cent as compared to the growth rate of 7.9 per cent in 2015-16,” it said.
Real GVA (Gross Value Added) is anticipated to increase from Rs 104.70 lakh crore in 2015-16 to Rs 111.68 lakh crore in 2016-17. “Anticipated growth of real GVA at basic prices in 2016-17 is 6.7 per cent against 7.8 per cent in 2015-16,” the official statement said.
The agriculture, forestry and fishing sector is likely to show 4.4 per cent growth in its GVA during 2016-17, as against the previous year’s growth of 0.8 per cent. The second advance estimates of National Income, 2016-17, revealed that the growth in the GVA from ‘manufacturing’ sector is estimated to be 7.7 per cent compared to 10.6 per cent in 2015-16.
Commenting on the data, Economic Affairs Secretary Shaktikanta Das said this year growth figures are on a high base of last fiscal and the numbers do not show much negative impact of demonetisation. The per capita net national income (current price) during 2016-17 is estimated to be Rs 1,03,818 showing a rise of 10.2 per cent compared to Rs 94,178 during 2015-16 with the growth rate of 8.9 per cent.
Private Final Consumption Expenditure (PFCE) at current prices is estimated at Rs 88.40 lakh crore in 2016-17 as against Rs 79.00 lakh crore in 2015-16. At constant (2011-12) prices, the PFCE is estimated at Rs 68.26 lakh crore in 2016-17 as against Rs 63.66 lakh crore in 2015-16.
In terms of GDP, the rates of PFCE at current and constant prices during 2016-17 are estimated at 58 per cent and 56.1 per cent, respectively, as against the corresponding rates of 57.8 per cent and 56.1 per cent, respectively in 2015-16.
The data further revealed that Gross Fixed Capital Formation (GFCF) at current prices is estimated at Rs 40.97 lakh crore in 2016-17 as against Rs 39.89 lakh crore in last fiscal.
At constant prices, the GFCF is estimated at Rs 35.55 lakh crore in 2016-17 as against Rs 35.35 lakh crore year-on-year. “In terms of GDP, the rates of GFCF at current and constant (2011-12) prices during 2016-17 are estimated at 26.9 per cent and 29.2 per cent, respectively, as against the corresponding rates of 29.2 per cent and 31.1 per cent, respectively in 2015-16,” the CSO said.