Finance Minster Arun Jaitley today attributed the lower GDP numbers to pre-GST destocking of goods and expressed hope that the economy will grow at 7 per cent, saying the manufacturing sector has bottomed out.
He further said that improvement in the global economy and good monsoon will aid GDP growth in the coming quarters which ought to be better if the country is to achieve the annual growth target.
The Economic Survey had projected a growth of 6.75 per cent to 7.5 per cent for 2017-18.
“Global economy is improving faster than what we thought and that is a positive trend. The domestic public investment is certainly going to be quite high because the revenue trend seems to be positive.
On the same rationale, with reforms continuing, the confidence in the economy globally being high, the FDI (inflow) will continue. The monsoon overall — the bigger picture — looks to be good and therefore that should send a positive impact,” he said.
“Another area of possibility is, are we able to get early successes for the banking system for the insolvency itself,” he said.
Terming the first quarter GDP data as a matter of concern, the finance minister said the government requires both in policy and investment to work more to improve this figure.
The detailed analysis shows that whereas the agriculture is in the normal range, the manufacturing has bottomed out to 1.6 per cent from 3.1 per cent.
The investment and services have improved, he said, adding the decline in manufacturing is because of GST impact.
“Since it was announced that GST would come into operation from July 1, most manufacturers were de-stocking during period April-June. As a result, trading went up because sales were taking place but it was stocks which were being sold. No new manufacturing happened,” he said.
This seems to be the pre-GST impact of de-stocking and that seems to be the most predominant reason, other factors could have also contributed, he added.
When asked about whether the GDP can grow at 7 per cent this fiscal, Jaitley said, “I am hopeful, because of the pre- GST de-stocking, this would really be the bottoming out.”
Earlier, Economic Affairs Secretary S C Garg said the growth is expected to improve in the next few quarters.
“Demonetisation, GST were the measures that impacted economic activities in the past 6-7 months. Those (demonetisation and GST) have reasonably played out now and from next quarter onwards, we would see the positive implication and impact of these two on GDP growth,” Garg said.
India is sitting in a quarter where economy has started turning the corner, he added.