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India: Growth Slow Down (A note on GDP)

Indian economy slowed down significantly in the first quarter of FY2017, which is worst in last three years exactly the same years Modi government is in center. According to recently released data GDP expanded a weak 5.7% annually in Q1 FY 2017, which was sharply below the 6.1% increase in Q4 FY 2016. All those analyst who were forecasting a healthy growth rate now are vanished and our finance minister is accepting that this is a matter of concern. The probable reason of this slow down can be demonetization or implementation of GST.
Export growth slowed notably from 10.3% in Q4 FY 2016 to 1.2% in FY 2017, the worst result since Q4 FY 2015. A strong rupee and confusion over the looming implementation of the Goods and Services Tax (GST) likely weighed on the result. There are many evidence in which suggests that firms were not sure of how to price product, with some even providing pre-GST discounts, which likely caused disruption in economic activity. Meanwhile, import growth rose to 13.4% in Q1 from 11.9% in Q4 FY 2016, a multi-year high. The rise was partly driven by rising demand for gold.

As per the market survey, after lower-than-expected June quarter growth number, the possibility of a 25 basis point rate cut at the Reserve Bank’s policy review meet on 6 December. The RBI reduced the repo rate by 0.25% to 6% earlier in August.

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