A UN report on September 14 said that India’s informal sector got badly affected by demonetisation and may take further hit due to GST. Thus, lowers down the country’s GDP from 7 per cent in 2016 to 6.7 per cent in 2017.
According to the UNCTAD’s Trade and Development 2017, the world economy in 2017 is picking up but not lifting off. The growth is expected to reach 2.6 per cent, slightly higher than in 2016 but well below the pre-financial crisis average of 3.2 per cent.
“The informal sector, which still accounts for at least one-third of the country’s GDP (gross domestic product) and more than four-fifths of employment, was badly affected by the government’s ‘demonetisation’ move in November 2016, and it may be further affected by the rollout of the goods and services tax from July 2017. Thus, even if the current levels of growth in both China and India are sustained, it is unlikely that these countries will serve as growth poles for the global economy in the near future,” the report added.
“Since debt-financed private investment and consumption have been important drivers of growth in India, the easing of the credit boom is likely to slow GDP growth,” it said.
The recent report indicated that manufacturing slowed ahead of the GST launch amid demonetisation effect which contributed to the lower growth of the economy.
According to a source, Gross value added (GVA) in the manufacturing sector fell sharply to 1.2 per cent from 10.7 per cent, with the predominant pressure coming from the private sector small and medium-sized enterprise (SME) segment.
Gross domestic product (GDP) growth in the first quarter of 2017-18 was lower than 6.1 per cent of the preceding one and 7.9 per cent in the same period last fiscal.