Attributing the slowdown in first quarter GDP to higher subsidy outgo, Finance Ministry today expressed confidence that good monsoon and impact of pay commission award will push the economic growth close to 8 per cent in the current fiscal.
“Given the good monsoon which we had this year, the 7th Pay Commission payout effect and various structural reform measures which the government has taken we expect the growth to be higher than what we achieved last year (7.6 per cent), perhaps close to 8 per cent,” Economic Affairs Secretary Shaktikanta Das told reporters.
He was responding to the CSO data which revealed that India’s GDP growth slowed to six-quarter low of 7.1 per cent in April-June period of the 2016-17 fiscal.
On the CSO numbers, the Secretary said lower GDP is mainly on account of higher subsidy expenditure.
The Gross Domestic Product (GDP) growth data is calculated under the new methodology at market price, while GVA is calculated primarily at factor cost. GDP is GVA plus taxes on products minus subsidies on them.
“The main reason for that (slowdown) is about 53 per cent higher subsidy expenditure. That is mainly because from Q1 itself we have started releasing subsidy allocations to the food, petroleum and fertiliser side, so that is the main factor.
“So, in fact, if you take out that subsidy expenditure, which is roughly about 0.3 per cent of GDP, then the GDP roughly would have been at 7.4 per cent, but that is the main reason,” the Secretary said, adding that net direct taxes too went down.
There are three “positives” in the data, he said.
Exports have turned positive, manufacturing sector has increased at a higher rate of 9.1 per cent and services segment too have expanded.
“The key concern is with regard to the gross capital formation, which is mainly on the investment side. We have to look into the reasons. We have taken certain measures for that and one can expect that going forward the positives on account of capital formation, will be visible,” Das added.