GDP increases to 6.6% in Q1, GST a setback- Poll

Bengaluru: The country’s economic growth is expected to see an increase of 6.6% Q1 of April-June against 6.1% in January- March quarter. However, a poll report by Reuters sounds worried that confusion over the Goods and Services Tax (GST) will reduce the growth in the coming quarters.

As per NDTV’s report, the forecast, from a survey of over 40 economists taken over the past week, compares with growth of 6.1% in the first three months of the year, the slowest pace in two years. The range of forecasts was wide from 5.7% to 7.2%.

It would leave Asia’s third-largest economy behind China, which last reported growth of 6.9 percent, but still among the world’s top performing economies.

The wiping of high-value currency notes by PM Modi’s government last November had taken out 86% of currency, which affected the consumer demand in a predominantly cash-reliant economy.

Also Read: GDP growth declined due to demonetisation- Congress

While the economy has clearly bounced back from the cash shock, forecasters in the latest Reuters poll said the pickup may be short-lived.

The smoothly implemented GST on July 1 has primarily hit micro, small, and medium sized businesses that were showing some signs of stabilisation before demonetisation and the launch of the GST, said Rupa Rege Nitsure, chief economist at Larson and Toubro Finance Holdings.

“This, combined with the ongoing stresses in large corporates, will certainly drag down gross domestic product growth. Most of the policy moves or structural reforms introduced recently are more suited for normal or boom times rather than to the current phase of slowdown. Hence, they are accentuating the intensity of the downturn,” Nitsure said.

Factory activity is forecast to have remained in a trench in August, though it may show some signs of recovery. The August Purchasing Managers’ Index (PMI) is forecast at 49.3 versus 47.9 in the previous month. Any number below 50 suggests contraction.