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India's GDP growth to accelerate in next 2 fiscals

India's GDP growth to accelerate in next 2 fiscals

Last year the GDP growth came in at 7.1 percent for the full financial year.

Gross value added (GVA) in agriculture and allied activities is projected to fall to 2.1 per cent in FY18 because of an expected drop in the rabi harvest, an nearly three per cent fall in kharif production, and on account of a big base, according to the first advance estimates of gross domestic product (GDP) for 2017-18 released on Friday.

GDP at current prices - the big macroeconomic number that serves as the foundation for the budget math - is expected to attain a level of Rs 166.28 lakh crore, reflecting a 9.5 per cent growth over the previous year.

According to the CSO, anticipated growth of real gross value added at basic prices in 2017-18 is 6.1 per cent as against 6.6 per cent in 2016-17. The Gross Value Added (GVA), which includes taxes, at basic constant prices (2011-12) is anticipated to increase from Rs 111.85 lakh crore in 2016-17 to Rs 118.71 lakh crore in 2017-18.

GDP had grown by 6 per cent in the first six months of FY18. "This would imply a reduction in nominal GDP as compared to the budgeted magnitude, which could mean that keeping the 3.2% (of the GDP) fiscal deficit target could actually amount to a lower nominal magnitude of borrowing", said D K Srivastava chief policy advisor, EY India. It was said that this had happened in expectation of implementation of Goods and Services Tax from July 1, this year.

GDP growth picked up to 6.3% in the July-September quarter after slowing to a three-year low of 5.7% in the first quarter, signalling that the economic recovery had gathered momentum.

The growth rate of the agriculture, fishing and forestry sector is expected to decline from 4.9% in 2016-'17 to 2.1% in 2017-'18.

This may affect the fiscal deficit, which the government had hoped to cap at Rs 5.46 lakh crore this year.

The GVA advance estimate for 2017-18 is much lower than the GVA growth 6.7 per cent estimated by the Reserve Bank of India (RBI) for 2017-18.

The practice started previous year after the government shifted the presentation of the Union Budget to 1st February from the end of February.

The advance estimates have, however, been compiled on the basis of actual data of the last seven months (April-October) in the fiscal 2017-18 and extrapolated for the next five months (November-March) on the basis of that.

The advance estimates "are not fully factoring in the expected pickup in growth in the later months of FY18, related to a favourable base effect and a "catchup" following the subdued growth momentum in H1 FY18", said Aditi Nayar, principal economist, ICRA. Anant said CSO's projections for the first advance estimates were therefore conservative. On other hand, a higher real GDP growth could well be an indicator about GST's minimal impact on prices of goods and services.

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