India Inc on Thursday expressed disappointment over slowing down of India’s GDP growth to 5.7 per cent in the June-ended first quarter of the current fiscal, as the industry was anticipating a rebound from low growth numbers.
“Growth numbers indicate a moderation in agriculture and industrial sectors. The uncertainty surrounding implementation of Goods and Services Tax (GST) did impact industrial production in the first quarter. However, we are confident that this effect will wane off in coming months,” said Pankaj Patel, President, Federation of Indian Chambers of Commerce and Industry (Ficci).
Patel observed that a marginal improvement had been reported in fixed capital formation numbers, which was a positive and probably supported by the increasing public investments.
“However, the persistent slack in private domestic investments remains a concern. The cost of finance for industry remains high,” Patel added.
On Thursday, official data showed that a major decline in manufacturing and the lingering effects of demonetisation sharply pulled down India’s economic growth rate in the Q1FY18 to 5.7 per cent, as compared to 7.9 per cent in the same period a year ago.
According to data from the Central Statistics Office (CSO), India’s gross domestic product (GDP) for the first quarter at Rs 31.10 lakh crore also registered a sequential fall compared with the 6.1 per cent growth in the fourth quarter of the 2016-17.
Industry lobby Assocham suggested the policymakers to take urgent steps to revive private investments following the recent push to accelerate infrastructure spending, to improve the business climate and (eventually) less leveraged corporates’ and banks’ balance sheets.
“Continuous fall in fixed investments, unsolved problem of banks’ NPAs (non-performing assets) in India, global policy and political risks and tightening financial conditions on account of deleveraging financial institutions and slowdown in real estate could weigh negatively,” the industry lobby said in a statement.
Gopal Jiwarajka, President, PHD Chamber of Commerce and Industry, said: “Although the world economy is showing signs of recovery, domestic economy is impacted by severe slowdown in the manufacturing sector which has posted a growth rate of 1.2 per cent in Q1 FY18 from 10.7 per cent in Q1 FY17.”
“There is a need to focus on reforms to improve the ease of doing business scenario particularly for MSMEs (micro, small and medium enterprises) in order to encourage the setting up of more industries and improve the overall industrial environment,” Jiwarajka said in a statement.
He added that there was a need to focus urgently on the supply of food products in the face of inching up of inflation.
According to Anis Chakravarty, Lead Economist, Deloitte, the fall in the latest growth number was possibly on account of the temporary shocks in combination with an overall slowing of the economy.
“Financial services show a worsening trend, while government-led services have done well with front loading of expenditure,” said Chakravarty.
“Going ahead, there is likely to be some bounce-back in the coming quarters as GST-related issues are resolved while the cleaning up of bank balance sheets are likely to impart a downward bias.”