Advance Estimates by CSO

Why in news?

• The first Advance Estimate for India’s GDP growth has been released by the Central Statistics Office (CSO).

What are the highlights?

• GDP growth in 2017-18 is estimated to be 6.5% as against 7.1% in 2016-17.
• Growth in GVA (gross value added) is projected to fall to 6.1% in FY18, much lower than the RBI's forecast of 6.7%.
• Manufacturing is projected to have decelerated growth at 4.6% as against 7.9 % in the previous year.
• Agriculture sector is estimated to grow at 2.1%.
• The estimate highlighted that the pace of agricultural expansion is expected to fall by more than half than the previous year.
• This is largely due to decline in kharif output year-on-year.
• Net taxes are projected to grow only 10.9% in the current financial year against 12.8% in the previous year.
• Public expenditure, which was the driver of economic growth in the previous year, is likely to slow.
• Private consumption is projected to record a slow growth in FY18.

What are the positive projections?

• GDP growth is projected to accelerate to 7% in the second half of the current financial year from 6% in the first half.
• Taking this forward, GDP growth is expected to become more robust in 2018-19.
• It is significant in the context of the fact that higher second-half growth has come despite a waning of public sector expenditures.
• Services are projected to go higher.
• This is despite the anticipated fall in growth in government-backed public administration, defence and others.
• This means the government is controlling its expenditure to mange fiscal deficit, which has crossed the Budget Estimates by November itself.
• Evidently, government final consumption expenditure is projected to fall by more than half.
• Investment seems to be reviving a bit with gross fixed capital formation forecast to rise by 4.5% against previous 2.4%.
• Electricity and trade & hotels sectors are expected to grow at a faster pace in FY18 compared with the previous financial year.

What is the significance?

• Growth - This will be the lowest growth rate in the last four years.
• It is largely attributed to the adverse impact of the goods and services tax (GST) and the lingering effects of demonetisation.
• With this, India might possibly lose the tag of being the fastest-growing large economy to China.
• Deficit - The government has increased its spending through supplementary demands for grants.
• It has also indicated that it would borrow Rs 50,000 crore more by 31 March.
• Given this and the lower-than-anticipated nominal GDP growth, there might certainly be a slippage in the fiscal deficit target.
• It could pose a serious challenge to the government's fiscal consolidation roadmap of bringing down the fiscal deficit to 3% of GDP by 2018-19.
• Data - The first advance estimates of GDP are based on data for only seven to eight months.
• Thus it has factored in only limited data for different sectors.
• Given this limitation, a better picture of the health of the economy is expected with the second advance estimates by February.

Source: Business Standard