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India’s Q1 GDP growth falls to 5.7%, hits 3-year low

Discussion in 'World Economy' started by Agent_47, Aug 31, 2017.

  1. Agent_47

    Agent_47 Admin - Blog Staff Member MODERATOR

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    NEW DELHI: India's GDP or gross domestic product grew 5.7 per cent on a year-on-year basis during the April-June period (Q1), government data showed on Thursday. During the previous quarter (January- March) the GDP had grown by 6.1 per cent.

    The GDP growth rate for the same quarter last year was 7.9 per cent.

    A Reuters poll of 30 economists had predicted a 6.6 per cent growth for India's GDP in the first quarter.

    The GDP growth rate has been slowing every quarter since March 2016, when it stood at a whopping 9.1 per cent.

    The slowdown was led by the manufacturing sector, which expanded at 1.2 percent from a year earlier compared with a 10.7 percent growth last year.

    The financial, insurance, real estate and professional services sectors also slowed to 6.4 percent in the June quarter from 9.4 percent a year ago.

    Analysts have owed the slowing rate of growth to disruptions in the economycaused by demonetisation and teething problems after the roll out of GST (Goods and Services Tax)

    "The lingering impact of demonetisation is visible in the low growth of construction. The GDP and GVA (growth value added) estimates have undershot our and market expectations by a considerable degree. The combination of lower volumes and higher discounts pre-GST (goods and services tax) and positive WPI (wholesale price inflation) weighed upon the manufacturing sector in Q1," said Aditi Nayar, economist, ICRA.

    Economists in the Reuters poll said uncertainty over how smoothly Goods and Services Tax (GST) will be implemented remains large and tough to forecast. It was launched on July 1 to harmonise various value-added tax regimes across states in India to one national standard.

    "The numbers seem to suggest that the slowdown from last the quarter has intensified due to the combination of long-term slowdown and temporary shock factors like demonetisation and GST," said Abheek Barua, chief economist, HDFC.

    The present rate of growth means that India is still one of the fastest growing economies in the world, although it still lags behind China which last reported a 6.9 per cent growth rate.

    The PMI or Purchase Managers' Index figures for the month of August will be declared on Friday. The Reuters poll forecast PMI at 49.3 versus 47.9 in the previous month. Any number below 50 suggests contraction.


    http://timesofindia.indiatimes.com/...west-pace-in-2-years/articleshow/60305396.cms
     
    Sancho, Hellfire, nik141993 and 2 others like this.
  2. sunstersun

    sunstersun Lieutenant FULL MEMBER

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    Any specific reason? My friend is telling me because of the currency correction.
     
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  3. randomradio

    randomradio Mod Staff Member MODERATOR

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    Currency did play a part. But there were many reasons.

    After the global financial crisis, the banks handed out a lot of cheap loans to companies. But the UPA govt did not make any reforms to the economy to sustain growth. So growth stagnated and consumption fell. This means private companies, particularly manufacturers, now had huge loans and less income. And many of them started defaulting on the loans. So we ended up with a credit crisis. Crony capitalism at play here.

    Private investment is extremely low, the economy is running on govt spending.

    So now the reality is only the govt can save us. But if the govt wants money they have to take it from the people and give it to banks and themselves. So they introduced demonetization to refinance the banks in order to alleviate the credit crisis and then the new tax regime so govt gets more money.

    So what happened is people started paying more taxes. Both income tax and indirect taxes. Which means they now have less money in hand so obviously consumption will fall even more. When consumption falls, the sector affected is the industry. That means industry will scale back or shut down because they don't have enough access to credit. That means layoffs, that means more people with no money to spend. The industry also gave huge discounts to their wares so people buy them before the new tax system hits the streets and screws up their inventory.

    Some of the biggest reforms to save the economy have started happening only since the last year. Major reforms in such a short time = problems for the economy. It is temporary of course, but we still have to climb out of the muck. Things will start going back to normal only from next year.
     
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  4. NKVD

    NKVD Lieutenant FULL MEMBER

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  5. sangos

    sangos Lt. Colonel ELITE MEMBER

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    Q2 also. GDP rate will shoot up from Q3 ie present rates.
     
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  6. Pundrick

    Pundrick Lieutenant FULL MEMBER

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    I think the low growth data is due to after effect of Demonetization and uncertainty due to GST, consumption has nothing much to do with it. Numbers will pick up in the next quarter but the fluctuation in the growth number is worrying, it should have been at least above 6%. Plus more than GDP number the fiscal deficit data looks more challenging for the govt.

    If GoI doesn't get 22-25% increase in tax revenue then I am worried that 3.2% fiscal deficit of GDP looks distant dream for this FYI.
    http://economictimes.indiatimes.com...-year-target-in-july/articleshow/60308723.cms

    The FDI in manufacturing has increased considerably in 2-3 years but the numbers are still not reflected on GDP yet, I don't know where did all the money go ?

    One more positive in this month, CAD is at its lowest i.e. 5% of GDP, lets hope we maintain this declining trend.
     
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  7. vstol jockey

    vstol jockey Colonel MILITARY STRATEGIST

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    The economy is in dumps,thanks to Jai-Italyji & Urjit Patel. I had written about it when the last RBI Governor was replaced. I had very clearly stated that there are forces working to kill our economy as the Lutyens Mafia is now controlling this govt also. The so called projected GDP growth thru higher tax revenue is an eyewash as it has been done by manipulating fuel prices only. In last one month alone fuel prices have gone up by nearly 10% while the rupee appreciated by over 6% and crude prices fell by over 10%.
    Large agri produce does not result in more farm income, infact its reverse of that. High lending costs kill businesses is known the world over. In the name of controlling inflation, we have gone mad and this govt needs to be kicked on its backside to get the house in order.
    Our agriculture is suffering, manufacturing is down due to high loan rates directly controlled by US educated cheats and agents working for this govt. AND finally the infra is down due to low lending by banks due to so called high NPAs.
    If I was FM of this nation, I will dump the inflation and reduce the borrowing cost by reducing CRR which will reduce lending rates and move towards a consumer driven economy for next 50 yrs by taxing consumption irrespective of social strata.
    Have you guys noticed the stupidity of GST? Anything which had a reduced price has been gifted with additional cess. This taily chutia was known as Cess Minister in Gujrat instead of Chief Minister due to the amount of cesses he imposed on people of Gujrat and till he is our PM, please learn to live with cesses. GST is another one such Jumla of this govt.
     
  8. sunstersun

    sunstersun Lieutenant FULL MEMBER

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    Q1-6.1 > Q2-5.7

    not very promising. need decades of 10% growth to catch China.

    even Europe/NA have had very encouraging economic news.

    Canada grew at 4.5%. USA at 3%
     
  9. Grevion

    Grevion Think Tank TROLL ELITE MEMBER

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    Economy is still bearing the brunt of Currency call back, this along with all the major reform happening in quick succession and we still have some uncertainty in the business sector about investment in much needed areas other then real state, automobile sector and high end commodities. The private investors need to come out of their IPO driven investment mentality.

    RBI needs to adopt some quick measures in the next quarter. Interests rate must be lowered down to boost up not only domestic consumption but also exports to some extent. Some Indian states still haven't formulated a plan for 7th pay commission implementation, they are still dealing with handing out subsidies and loan wavier plans which is very pathetic to say the least.
     
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  10. mirage

    mirage 2nd Lieutant FULL MEMBER

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    only GST , the situation will start improving after another quarter , and then the diesel engine will be red hot
     
  11. Paliwal Warrior

    Paliwal Warrior Lt. Colonel ELITE MEMBER

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    Thank God that you are not FM

    Crr maintaining at certain level is necessary

    Crr does not have a large impact on rates

    Repo & rev repo rates effectively signals interest rates

    As also banks own cost of funds

    It is also plain stupidity to say the problem is due to higher interest rates
     
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  12. Paliwal Warrior

    Paliwal Warrior Lt. Colonel ELITE MEMBER

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    Pl merge with Indian economy thread
     
  13. NKVD

    NKVD Lieutenant FULL MEMBER

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    Interesting Views goes With Result of GST


    Home » Industry
    Last Published: Thu, Aug 31 2017. 10 04 PM IST

    [​IMG]

    Meet the economist who predicted India GDP growth at 5.7% in Q1
    Rabobank’s Hugo Erken says GST will impact India GDP growth rate in Q2 as well, but predicts a rapid pick-up in economic growth to near 8% in
    He said that while the rollout of the goods and services tax (GST) is expected to weigh on second quarter GDP growth, on a medium- to long-term basis, the Indian economy has the potential to reach a higher growth rate. Various reforms undertaken by Prime Minister Narendra Modi are the main reason for his optimism.

    Edited excerpts of the interview:

    You rightly predicted Q1 GDP to decelerate to 5.7%. What was the basis of this prediction?



    At Rabobank, we use NiGEM, an econometric world trade model, for our economic forecasts. Partly the sluggish consumption in private sector was expected due to lasting impact of demonetisation. This was visible in the previous quarter as well. Another factor that we looked at growth of bank loans, which was negative and decreasing. Part of this was because of build-up of stressed assets. In our forecasts we also take into account the impact of GST, which will probably weigh on growth in the July-September quarter.

    What are your thoughts on demonetisation?

    I think it is little bit too early to say if the exercise was useful. We still have to see what will eventually happen with tax collection and revenues. Personally, I think it was a bold decision, but in the end it will be beneficial to India because of continuing formalization of the economy. In the short-term, it is disruptive and as the GDP numbers show, India is paying a price for it. However, in the medium-term we are still confident that India GDP growth will pick up quite rapidly to somewhere near 8% towards the October-December quarter. We are quite bullish on India in the medium- to longer-term.

    What is the basis for your optimism?

    We think that the reforms undertaken by the Modi administration so far are will generate a positive impact on growth. Also, by the end of year, transitory and negative impact of GST, as well as demonetisation, will peter out. The central bank (Reserve Bank of India) has also taken steps to clean (up) bad loans. We think this will improve the health of the banking sector, especially public banks, and help aid private investment.



    What is your GDP forecast for Q2?

    We believe GST will continue to weigh on Q2 GDP as seen from the July purchasing managers’ index, which fell sharply. Our Q2 GDP forecast is somewhere near 5.9-6%.

    http://www.livemint.com/Industry/OC...-who-predicted-India-GDP-growth-at-57-in.html
     
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  14. Grevion

    Grevion Think Tank TROLL ELITE MEMBER

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    Why so angry sir ji??
    And why vent out your anger on Kejriwal? He won the recent elections in Delhi you know.:LMAO:
     
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  15. randomradio

    randomradio Mod Staff Member MODERATOR

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    Govt does not control CRR, repo rates etc. That's done by RBI. And whatever they are doing is the correct course of action.

    The banks will have to initiate bankruptcy proceedings against defaulters.
     

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