India is no longer the fastest-growing economy

Thursday, June 1st, 2017, 4:37 am

Slowdown brings GDP down to 6.1% in fourth quarter

India lost its fastest-growing major economy tag in the fourth quarter of 2016-17, with GDP growth coming in at 6.1% compared with China’s 6.9% in the same period.

Data from the Ministry of Statistics on Wednesday showed GDP grew 7.1% in the financial year 2016-17, slower than the 8% registered in 2015-16. The GDP numbers were based on the new 2011-12 base year recently adopted for data including the Index of Industrial Production (IIP) and Wholesale Price Index (WPI). Gross value added (GVA) growth was 6.6% for 2016-17 and 5.6% in the fourth quarter, compared with 7.9% in 2015-16 and 8.7% in Q4 of that year.

The “numbers show a clear slowdown in GVA,” DK Srivastava, Chief Economic Adviser at EY India, said.

“That is, post-demonetisation there has been a slowdown,” he said. “The GDP growth rate is slightly higher (than GVA growth) because of a more than proportionate increase in indirect tax net of subsidies. But the GDP also shows a reduction in Q3 and Q4 numbers compared with the beginning of the year. So demonetisation has clearly had a tangible and adverse impact.”

The Centre, however, maintained that it was happy with the growth rate, with Chief Statistician T.C.A. Anant saying that the economy was growing “reasonably well.”

“If you look at the current and time series estimates, it is clear the economy is growing reasonably well,” Mr. Anant said, while briefing the press about the GDP numbers.

“However, if you look at it from the perspective of what sort of growth rates do we desire over a period of time, then from that perspective there is more to be achieved.”

“We can take some measure of satisfaction, but the numbers do reveal there are areas that still could improve,” Mr. Anant added. “One of the areas is capital formation. It continues to be relatively soft, with growth still below 30%. We would like to see these rates well above 30%.”

Looking deeper, GVA growth slowed in almost every sector in Q4 of 2016-17 compared to the growth witnessed in the corresponding period of the previous year.