Businesses going into a "de-stocking" mode on inventories in anticipation of the GST rollout from July and sluggish manufacturing growth pulled down the Indian economy's growth during the first quarter of this fiscal to 5.7 per cent, clocking the lowest under the Narendra Modi dispensation. This would also jeopardise finance minister's target of bringing down the fiscal deficit to 3% of GDP by 2018-19.
The Gross Value Added (GVA) has been projected to be at 6.1 per cent versus 6.6 in the past year.
India's GDP growth is forecast to slow down to a four-year low of 6.5 per cent in 2017-18 as it was hit by demonetisation and the rollout of a chaotic GST, which was changed repeatedly in the past six months to quell protests by traders and industry.
The construction sector is expected to grow at 3.6% in 2017-18 from 7.1% a year ago.
Within this, the GVA growth rate for "agriculture, forestry and fishing" is expected to slow sharply to 2.1%, compared with the previous year's 4.9% pace.More news: Vanguard Dividend Appreciation ETF (VIG) Rises 0.5327% for Jan 5
The GDP data could be revised upwards as the current projections are based on incomplete output and corporate income data, amid signs that people are buying more goods and companies are adding new capacities to meet growing demand. Power and hotels are the only two sectors that will grow at faster rates of 7.5% and 8.7%.
"For FY18 as a whole, we continue to expect GVA and GDP growth to print at 6.5 per cent and 6.7 percent, respectively, higher than the advance estimates of 6.1 per cent and 6.5 per cent", said Aditi Nayar, principal economist at ICRA.
The GST also impacted net taxes as these are projected to grow only 10.9 per cent in the current financial year against 12.8 per cent in the previous year. "Investment growth of nearly twice of a year ago indicates investment reviving".
GDP growth was 7.1 per cent last fiscal.
Investment: Investment seems to be reviving a bit with gross fixed capital formation forecast to rise by 4.5 per cent against 2.4 per cent.
In addition, United Kingdom economic growth rates continue to lag behind other industrialised countries, including the USA, which recently reported growth at an annualised rate of 3.0 per cent during the three months to the end of September 2017.