FY18 GDP growth forecast raised to 6.6%, but here’s what may upset CSO’s calculations

Regaining the status of world’s fastest growing major economy, India’s GDP growth rate jumped to 7.2 percent from a year earlier, in the October-December quarter, according to Central Statistics Office (CSO) data. India pipped China that reported a GDP growth rate of 6.8 percent in the same quarter. India registered GDP growth of 5.7 percent […]

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Budget 2018: The rate of expansion in gross domestic product (GDP) in FY17 has been kept unchanged at 7.1%.

Regaining the status of world’s fastest growing major economy, India’s GDP growth rate jumped to 7.2 percent from a year earlier, in the October-December quarter, according to Central Statistics Office (CSO) data. India pipped China that reported a GDP growth rate of 6.8 percent in the same quarter. India registered GDP growth of 5.7 percent in the April-June quarter and 6.5 percent in the July-September quarter. Meanwhile, CSO revised its GDP data to 6.6 percent against 6.5 percent earlier for FY18. However, for this to happen India needs to grow at 7.1 percent to clock a GDP growth rate. It can only be achieved if agriculture and manufacturing sectors maintain the growth momentum as witnessed in the December quarter, CARE Ratings said in a report. Agriculture and manufacturing grew at 4.1 percent and 8.1 percent QoQ.

Public spending has been a major driver for growth till now. However, the latest fiscal deficit figure reaching 113 percent of the full fiscal year target could be a risk factor, particularly for construction sector, CARE Ratings said. The government has announced a cut in capital expenditure to the tune of Rs 300 billion in the revised number for fiscal year 18 over the earlier. budgeted number, Madan Sabnavis of CARE Ratings wrote in Business Standard. In such a scenario, CSO estimates look tough to achieve. GDP growth in FY18 is likely to reach 6.7 percent that means GDP growth of 7.2 percent in March quarter, CARE Ratings said.

Recently, International Monetary Fund (IMF) projected India’s economic growth to clock 7.4 percent and 7.8 percent in 2018 and 2019, respectively. For the first time in thirteen years, global ratings agency Moody’s increased sovereign ratings of India and estimated it to grow at a rate of 7.6 percent in 2018 and 7.5 percent in 2019. The ratings agency said that the Indian economy has almost recovering from the impact of demonetisation and implementation of goods and services tax (GST). From 2005 to 2008, India grew at a rate of over 9 percent. A recent report by Morgan Stanley had already said that India’s economic recovery will accelerate to 7 percent in the October-December quarter.

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