Macro Economy

Economy grew 7.1% in FY17, but core sectors are still sputtering

Our Bureau New Delhi | Updated on January 31, 2018 Published on January 31, 2018

Industrial activity is yet to fully stabilise after the twin disruptions of the note-ban and GST.

Eight key industries’ growth dips to 4%, a5-month low, in Dec

The economy is estimated to have grown by 7.1 per cent in 2016-17 in line with the earlier projection of the Central Statistics Office.

The data is part of the first revised estimates of national income for 2016-17, which was marked by the sudden decision to demonetise ₹500 and ₹1,000 notes. The CSO also revised upwards its GDP growth estimate for 2015-16 to 8.2 per cent from the previous 8 per cent.

Economy activity in 2017-18 is expected to have been further impacted by the rollout of GST (Goods and Services Tax), and GDP growth is estimated at 6.7 per cent. The Economic Survey, released on Monday, projected GDP growth of 7-7.5 per cent next fiscal.

Industrial growth

But ahead of Union Budget 2018-19 on Thursday, a separate set of official data showed that industrial activity is yet to fully stabilise after the twin disruptions of the note-ban and GST. The eight core industries grew at a five-month low of 4 per cent in December, with little or no growth in six of the monitored sectors.

These eight core industries grew 7.4 per cent in November last year and 5.6 per cent in December 2016.

The data indicates that factory output may also have slowed down in December as the core sector industries comprise 40.27 per cent of the weight of items included in the Index of Industrial Production.

IIP grew 8.4 per cent, a 25-month high, in November last year.



Gross value added

The CSO also revised higher its projection of growth in gross value added (GVA) to 7.1 per cent from the previous forecast of 6.6 per cent, against 8.1 per cent growth in 2015-16. The CSO attributed the revision in its GVA estimate to higher performance in the primary and secondary sector, which grew by 7.4 per cent and 6.1 per cent, respectively. The performance of the tertiary sector was more subdued than previously captured in the provisional estimate release in May 2017.

“Nominal GDP or GDP at current prices in 2016-17 is estimated as ₹152.54 lakh crore while that for 2015-16 is estimated as ₹137.64 lakh crore, a growth of 10.8 per cent during 2016-17 as against 10.4 per cent during 2015-16,” it said.

Per capita income at current prices is estimated at ₹94,731 and ₹1,03,870, respectively, for 2015-16 and 2016-17.

Private final consumption expenditure rose 7.2 per cent and government final consumption expenditure has been revised down to 12.2 per cent. Gross savings grew 6.29 per cent while gross fixed capital formation is estimated at 10.1 per cent in 2016-17.

“The extent of the revision in the growth for government final consumption expenditure and gross fixed capital formation is surprisingly large. In constant terms, the size of the discrepancies remains quite substantial for 2015-16 and 2016-2017, which may portend subsequent revisions in the pace of growth of the components of GDP,” said Aditi Nayar, Principal economist, ICRA.

Under the third revision, the CSO has estimated GDP growth in 2014-15 at 7.4 per cent from earlier estimates of 7.5 per cent.

Published on January 31, 2018
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