GDP slips to lowest in 6 quarters at 7.1% in Q1

01 Sep 2016 Evaluate

India's gross domestic product (GDP), slipped to 7.1 per cent in April-June quarter of 2016-17 as compared to 7.9 percent in the January-March period. It is lowest in 6 quarters, mainly due to slower growth in construction and agriculture sectors and contraction in the mining sector. The economy had expanded at 7.5 percent in the April-June quarter of last financial year, 2015-16. The previous low was 6.6 per cent GDP growth in the October-December quarter of the 2014-15. GDP is calculated by adding taxes to gross value added and subtracting subsidies.

As per data released by the Central Statistics Office (CSO), GDP growth (measured in terms of constant 2011-12 market prices) for the First Quarter (Q1) of 2016-17 was estimated to be 7.1 per cent as against 7.5 per cent for Q1 of 2015-16. Growth of GDP for the full year 2015-16 was estimated to be 7.6 per cent. Gross Value Added (GVA), which is estimated at the basic price, showed a growth of 7.3 per cent in April-June of 2016-17 which is higher than the GDP growth rate of 7.2 per cent in Q1 2015-16. GVA growth is higher than the GDP growth because the growth in net indirect taxes declined from 11.9 per cent in Q1 2015-16 to 3.6 per cent in Q1 2016-17.

The growth in agriculture and allied sectors is estimated at 1.8 per cent in Q1 2016-17, as against 2.6 per cent in Q1 2015-16. Manufacturing growth increased from 7.3 per cent in Q1 2015-16 to 9.1 per cent in Q1 2016-17. The growth in services increased from 8.8 per cent in Q1 2015-16 to 9.6 per cent in Q1 2016-17.

Attributing the slowdown in first quarter GDP to higher subsidy outgo, Finance Ministry stated that the lower growth in Q1 of 2016-17, compared to Q1 of 2015-16 is attributable to increase in subsidies by 53 per cent which has resulted in lower growth of net indirect taxes. It is also due to the negative growth in gross fixed capital formation. GFCF growth at constant prices declined from 7.1 per cent in Q1 of 2015-16 to (-) 3.1 per cent in Q1 2016-17.

Though, it expressed confidence that good monsoon and impact of pay commission award will push the economic growth close to 8 percent in the current fiscal. The Finance Ministry states that the GDP growth has also been helped by the improvement in the growth of export of goods and services from (-) 5.7 per cent in Q1 2015-16 to 3.2 per cent in Q1 2016-17, as well as, a reduction in the growth of imports from (-) 2.4 per cent in Q1 2015-16 to (-) 5.8 per cent in Q1 2016-17.

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