The slow GDP growth in FY18 is in spite of the fact that the economic growth picked up to a modest 7.2% and an impressive 7.7% in the third and fourth quarter respectively.
The GDP growth in the financial year 2017-18 was 6.7%, lowest in Narendra Modi era even as the economic growth in the fourth quarter shined at an unexpected rate of 7.7%, highest in seven quarters. The slow full-year GDP growth in FY18 is in spite of the fact that the economic growth picked up to a modest 7.2% and impressive 7.7% in the third and fourth quarter respectively.
The disruption caused due to destocking of inventories ahead of the implementation of the Goods and Services Tax (GST) and slow growth in drought and demonetisation-hit agriculture sector ate India’s economic growth in the first two quarters. If compared, the GDP growth results in the third quarter made India emerge as the fastest growing emerging economy beating China at 6.8%.
Even as the twin shock of demonetisation and the indirect tax overhaul, stalled growth, economists are bullish on India’s macro fundamentals. Hugo Erken of Rabobank International said that the domestic dynamics of India are “very strong” and “external volatility” won’t derail the current economic recovery. He is known as one of the most accurate forecasters of India’s GDP.
A Reuters poll of 55 economists said that India will continue to grow in the range of 7.2%-7.5% in the next fiscal year FY19, which began on April 1. Rating agency Moody’s on Wednesday cut India’s GDP growth forecast from 7.5% earlier to 7.2%, saying that oil price and government’s tight fiscal situation could weigh in on the economic growth. Moreover, FY19 will be last working year ahead of the 2019 Lok Sabha polls, economists also expect populist measures to take priority over economic reforms.
The fiscal year 2017-18 has been a mixed bag for the Narendra Modi government. The government, on one hand, implemented the GST, jumped 40 ranks on World Bank’s Ease of Doing Business and got a surprise sovereign rating upgrade from Moody’s, on the other hand, the transition to GST failed to be smooth, fiscal deficit situation remained tight and the Nirav Modi-PNB scam took a toll on the ambitious Rs 2.11 lakh crore bank recapitalisation plan.