GDP growth hits three-year low of 5.7% in April-June

The CSO estimates shows that gross value added (GVA) grew 5.6 percent in April-June which is lower than the last year's 7.6 percent growth during the same quarter. Indicators in this section performed well with trade, hotels, etc recording growth of 11.1% from 8.9%, while public administration, defence and other service clocked growth of 9.5% in Q1 from 8.6% in Q1FY17.

India's economic growth shrank to 5.7% in the first quarter of the current financial year compared to 6.1% growth in the previous quarter with the government Thursday attributing it to the introduction of a new composite tax.

"Slowdown of the economy was witnessed after the second quarter previous year itself". Consumption growth continued to be stable as the moderation in private consumption was countered by sound growth in government demand, noted ANZ in a research report.

Latest growth rate was the lowest since the March quarter of 2014. I would expect GDP for the full year will be somewhere closer to 6 percent. "The lingering impact of demonetisation, as well as the effect of the real estate regulatory authority (RERA) are visible in the low 2% growth of construction in the first quarter".

Sabnavis also blamed factors such as GST and demonetisation for affecting growth. Past year for the same quarter, consumption grew at 8%. "Its performance has been poor, though the sales growth is good", he added. "The black spot remains investment". Industry body PHD Chamber of Commerce and Industry called the growth data "disappointing" and said there was "a need to focus on reforms to improve the ease of doing business scenario particularly for [micro, small and medium enterprises] in order to encourage the setting up of more industries".

A day after the government reported lower-than-anticipated gross domestic product (GDP) figures, the market seems to have taken it in its stride and was trading in the green.

"It is incorrect to hold demonetisation responsible for the slowdown of growth in the GDP".

Outlook ahead has definitely come down.

That compared with a forecast of 6.6 percent growth by economists in a Reuters' poll, and was slower than 6.1 percent growth posted in January-March. "Nevertheless, the likelihood of economic growth surpassing 7.0% for the ongoing fiscal year has diminished after the bleak Q1 readings". "It is about time India does something about it, else we will have to brace ourselves for an extended spell of weak growth". "The computation of GDP relies heavily on corporate data from the Ministry of Corporate Affairs database".

  • Jon Douglas