India’s GDP growth sharply rebound to 6.3% in fiscal second quarter July-September from a three-year low in the first quarter, as businesses sprung into economic activity ahead of a condensed festive season and accelerated production to build inventory after the implementation of GST. However, Chief Statistician TCA Anant said that since the GST was a challenge in the calculation of the GDP, it could be a possibility that “indirect tax collection in the second quarter may actually be higher than reported”.
India’s GDP growth in the second quarter (Jul-Sep) accelerated to 6.3% from 5.7% in Apr-Jun and 6.1% in Jan-Mar, Central Statistics Office data showed. However, the pace of growth in Jul-Sep was still way below 7.3% recorded in the corresponding quarter a year ago. According to TCA Anant, with the introduction of the GST, sales tax data is subsumed under GST, which posed a logistical problem and so the methodology was changed to compute the Gross Value Addition (GVA).
“It is likely when revised tax estimates are prepared, indirect tax collections may actually be higher than reported,” TCA Anant said, adding the that Q2 GDP number showed a significant trend reversal. “We will be monitoring the implementation of the GST for some more time,” TCA Anant said.
“GDP is derived by adding taxes on products, net of subsidies on products, to GVA at basic prices. The taxes on products include both GST and non-GST Revenue of Central and State Governments,” Ministry of Statistics & Programme Implementation said in a statement. “GDP is derived by adding taxes on products, net of subsidies on products, to GVA at basic prices,” it added.
A sharp bounce in manufacturing growth rate at 7% in July-September from 1.2% in the preceding quarter was among the primary drivers behind the second quarter GDP growth acceleration. On the other hand, farm growth slowed in the second quarter to 1.7% from 2.3% in the preceding three-month period. Agricultural production in the second quarter was held up due to poor crop output, India’s Chief Statistician TCA Anant said.
Construction activity also recorded a decent expansion with a growth rate of 2.6% in July-September vs 2% in the previous quarter. The industrial activity also saw a spike in 5.8% growth rate in the second quarter vs 1.6% in the first quarter. Electricity output growth at 7.6% vs 7% also supported economic growth.