New Delhi – The government claimed that 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.
Finance Minsiter Arun Jaitley said, “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.”
“Major sector which has seen a sharp decline is industry. Corporate entities were pulling down their stocks in Q1 (April-June), which seems to be in anticipation of Goods and Services Tax (GST) price labelling effect,” Chief Statistician of India T.C.A. Anant said after the GDP numbers were released.
However, the process is ending and manufacturing is expected to pick up from the current quarter, said Jaitley.
“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's economic growth rate in the first quarter of the current fiscal ended June fell to 5.7% from 7.9% in the same period a year ago, official data showed.
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% 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.
“The major reason for slowdown in growth at 5.7% is on account of manufacturing, where gross value added (GVA) is largely contributed by the private sector. In all, 74% of the GVA comes from corporate sector. Its performance has been poor, though the sales growth is good," Anant said.
Anant said though the growth was a result of multiple factors, it should not be linked to demonetisation.