After the recent upward revision of the Gross Domestic Product (GDP) numbers for the financial years 2016-17 and 2017-18, the growth rate in the current financial year may come down to 5.9%, a report has shown. The Central Statistics Office (CSO) on Thursday revised GDP growth rate for FY18 and FY17 by 50 and 110 basis points to 7.2% and 8.2% respectively.
“At this rate, FY19 growth rate now stands at 5.9% (earlier 6.7%),” Soumya Kanti Ghosh, Chief Economic Adviser, SBI said in a report. The revision of data, he said, was “surprising” as it changed the story of slowdown, which had begun five months before demonetisation.
The latest revision in numbers shows that India’s economy grew at the fastest rate under the Narendra Modi government in the demonetisation year (FY17). The revision in data is “purely explained” in adjustments to consumption, said Ghosh.
“PFCE (Private Final Consumption Expenditure) expanded at 8.2% in FY17… Such a surge in consumption expenditure in FY17 is possibly because of people possibly unlocking the cash and converting them into purchases,” Ghosh said.
“With cash coming back into the system and remonetization now complete people have now slowed down their consumption that perhaps was forced and preloaded one when demonetization happened,” he added. With PFCE expected to be just 4.2% in FY19, the GDP growth rate for the year could be just 5.9%.
However, for now, the sharp spike in GDP numbers have raised eyebrows amid controversy over unreleased report of unemployment, which showed joblessness rate at 45-year high in 2017-18. Many policy experts have expressed worry over the CSO data losing credibility.
Chief Economist of Care Ratings, Madan Sabanavis told CNBC-TV18 that the numbers were “baffling” and a “little hard to digest”, while legendary fund manager Mark Mobius said that he would take growth projection “with a pinch of salt”.