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.
The expansion in gross domestic product (GDP) was 6.1 per cent in the preceding quarter and 7.9 per cent in the same period last fiscal. The previous low of 4.6 per cent was recorded in January-March 2014.
Finance Minister Arun Jaitley said, “The 5.7 per cent GDP growth in Q1 was a matter of concern. Manufacturing was down due to GST impact on destocking and with GST implemented, the curve could turn for better.”
Crisil research said on a note that for fiscal 2018, it was in the process of revising down its GDP growth forecast of 7.4 per cent. Part two of the Economic Survey has already warned that reaching the upper end of the 6.5-7.5 per cent GDP forecast would be difficult.
Ever since the shock decision of demonetisation, the economy, which was already sluggish, has slumped further as businesses and consumers are adjusting to new disruptions, which at least in the short term are hurting growth.
However, Niti Aayog’s new vice chairman Rajiv Kumar said on September 1 that Economic growth in the second quarter (July to September) of 2017-18 is expected to soar to 7- 7.5 per cent on the back of good monsoon and clarity over the Goods and Services Tax (GST).