Why GDP only 5.7%

Economy outlook why5.7%only 

Data released by the Central Statistics Office (CSO) showed the economy grew 5.7% in April-June, the first quarter of the current fiscal year, slower than the previous quarter’s 6.1% and much lower than the 7.9% growth registered in the first quarter of 2016-17.
Good condition-
1.Inflation has been moderate, and touched a low of 1.5% recently.
2. trade and fiscal deficits are moderate and manageable. So they don’t eat up investible resources or precious foreign exchange.
3.The interest rate has been cut repeatedly over the past year and a half.
4.The inward rush of dollars is at a peak, both in financial markets (stocks and bonds) and as direct investment.
5.The stock market index is at an all-time high.
6.Oil prices have been stable and comfortably low.
7.Finally, the monsoon has been normal
Slowdown steepest in manufacturing,
The manufacturing growth at 1.2% is the lowest in the past five years. It’s the lowest since we switched to a new methodology (based on Gross Value Added).
Uncertainty related to the GST rollout on 1 July, which came about eight months after the government cancelled 86% of the currency, saw manufacturers cutting production and and consequent inventory deaccumulation. As a result, manufacturing growth slowed to 1.2% in the June quarter from 5.3% in the preceding quarter.
Bank credit shrank by 1.8%, i.e. negative growth . This is the lowest it has been for at least 13 years. A State Bank of India report said that credit growth for the year ending last March was the lowest in 63 years
Growth rate in other sectors:
Service sector– trade, hotels, transport and communication etc. posted growth rate of over 7 per cent in the first quarter. Trade, hotels, and transportation, impacted by demonetisation in the March quarter (6.5%),rebounded to grow 11.1%, mostly due to discount sales ahead of GST implementation .
Mining activity contracted by 0.7% Construction activity revived marginally from the negative print (-3.7%) in the March quarter to 2% in the June quarter The agricultural sector grew 2.3 percent The civil aviation sector saw passenger traffic soaring by 15.6%,
Significant Challenges before the government
The GDP is measured in at least two different ways. The first is by looking at the production side while the second
is by looking at the aggregate of all spending, whether on consumption, or by foreigners buying our exports, or on investments into new factories and projects and government spending.
Big priority areas before government are-
Declining Private Investment:
Investment, which is between 30 and 35% of the total pie, needs to grow at least in double digits. Investment in future capacity creates GDP growth of the future. It needs to be led by the private sector . Currently, that component is barely growing at 1.5%.. As a result, capital formation is steadily declining for several years. Private sector investment has practically come to a standstill. Despite the push for ‘Make in India’, reforms for improving ‘Ease of
Doing Business’, increased access to electricity, improvement in infrastructure and private investment are not picking up. Initiatives such as Housing For All, Smart Cities and Digital India give room for huge opportunities for private entrepreneurs.


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