Government estimates lower GDP for 2018-18 at 6.5%

Fears and warnings of Congress proved true Chidambaram attacks Modi govt over state of economy

The services sector, which accounts for almost 60% of the economy, is estimated to grow 8.3% in 2017-18, higher than the 7.7% in 2016-17.

Its reactions came after the estimate of national income for 2017-18, released by the Central Statistics Office (CSO), showed that implementation of GST and subsequent slowdown in the manufacturing sector was expected to drag down the country's growth rate to 6.5 per cent from 7.1 per cent achieved in 2016-17.

GDP at current prices - the big macroeconomic number that serves as the foundation for the budget math - is expected to attain a level of Rs 166.28 lakh crore, reflecting a 9.5 per cent growth over the previous year.

The growth in GDP during 2017-18 is estimated at 6.5 percent as compared to the growth rate of 7.1 per cent in 2016-17, the CSO said.

The good news, embedded in Mospi's early estimates, is that the economic growth momentum is expected to pick up in the second half (H2) of the current fiscal at 7% compared to the 6% growth in the first half (H1).

"Anticipated growth of real GVA at basic prices in 2017-18 is 6.1 percent as against 6.6 percent in 2016-17".

GDP had grown by 6 per cent in the first six months of FY18. He also indicated that the government could find it hard to achieve its fiscal deficit target of 3.2 per cent of GDP.

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But what is worrying is that finance minister Arun Jaitley had projected a GDP growth of 11.75 per cent at current prices in his budget last February (Rs 168.47 lakh crore).

The ministry projects manufacturing growth for the whole financial year to slow down to 4.6% from 7.9% last year, along with growth in agriculture, forestry and fishing expected to drop to to 2.1% from 4.9% during the same period last year.

Other economists cited the latest PMI survey showing an uptick in manufacturing and said the economy had regained momentum in recent quarters, signalling growth would rebound in the next fiscal year.

Any recovery in GDP growth is expected on the back of improved industrial performance.

The CSO forecast comes three weeks before the Modi government comes out with its final full-year budget before the general election due in May 2019.

Despite the poor estimates, the analysts are optimistic about economic growth in 2018-19. Taken together, India's "real" or inflation-adjusted GDP grew 6 percent in April-September.

The EAC-PM Chairman said the advance estimate numbers only reinforce what was already known - that reforms undertaken by the government will place the economy on an upward growth trajectory, without compromising on fiscal consolidation. "And as the estimates are missing the RBI expectations, the central bank is likely to pause in its next policy meeting in February 2018".

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