Economic growth in the second quarter (July-September) of 2017-18 is expected to soar to 7- 7.5 per cent on the back of good monsoon and clarity over GST, Niti Aayog’s new Vice-Chairman Rajiv Kumar said today. India’s GDP growth rate slid to a 3-year low of 5.7 per cent in the first quarter (April-June), mainly on account of slump in manufacturing. “I am confident that in the July-September quarter, economy will grow by 7-7.5 per cent. Destocking, which was in anticipation of GST rollout has completed and now, there is more clarity on the new tax regime,” said Kumar, who took over as Vice-Chairman today replacing Arvind Panagariya. “Also, monsoon is good. Many IPOs are in the offing. FDI and FIIs are also increasing.”
On the effect of demonetisation, he said it impacted growth in the first quarter as by that time the currency shortage triggered by the scrapping of Rs 500 and Rs 1,000 notes on November 9 last year was over. Kumar further said the decline in growth in the first quarter can be attributed to destocking by manufacturers in anticipation of GST rollout from July 1. Referring to former prime minister Manmohan Singh’s statement that demonetisation would reduce economic growth by about 2 per cent, Kumar said quarterly data cannot be used to make such conclusions.
“With due respect to my mentor Manmohan Singh, this quarterly data cannot be used to say look GDP will drop by 1 -2.5 per cent… There has been successive drop in GDP growth. There is a historical experience, every country which has taken fundamental governance reform has seen shrinkage in output,” he explained.