GST, note ban to keep India’s GDP growth below 7% this fiscal, experts believe

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Disruptive effects of Goods and Service Tax (GST) and lingering influences of 2016 demonetization are likely to limit India’s economic growth below 7 per cent during this fiscal year, according to experts. The prediction comes one day before release of advance estimates of national income.

“It is difficult for GDP to cross 7 per cent this fiscal unless the base is revised downwards. The economy is expected to do well in the third and fourth quarter,” said SBI Research Chief Economist Soumya Kanti Ghosh.

The GDP growth is likely to be 6.5 per cent on unchanged base last year, Ghosh was quoted by PTI. The Indian economy grew 7.1 per cent in 2016-17, in comparison to 8 per cent seen during 2015-16. The Central Statistics Office (CSO) will release its advance estimates of national income for the financial year 2017-18 on Friday.

Elaborating further, Ghosh said the growth could be higher if the last year’s expansion is revised downwards because lower base last fiscal would result in higher growth for 2017-18.

Former Planning Commission Deputy Chairman Montek Singh Ahluwalia seconded these estimates. The renowned economist said the GDP growth would be around 6.2 per cent to 6.3 per cent for the current fiscal.

Former Planning Commission member and senior economist Abhijit Sen said that glitches in tax collection after the GST roll out is likely to limit economic growth this fiscal. He said that GDP growth for FY18 would fall between 6 per cent and 6.5 per cent. He was skeptical about buoyancy in the latest PMI data and other numbers used for showing rosy picture of state of economy at this point of time.

Sugata Bhattacharya, chief economist at Axis Bank, said the Gross Value Added (GVA) would be 6.6-6.8 per cent for the current fiscal. “We have not factored in tax collections in the current fiscal. But if the tax collections remain robust then the GDP growth could be higher,” he said.

The GVA is a new concept introduced by the CSO to measure the performance of the economy. The GDP is tabulated by adding taxes to the GVA after reducing subsidies from that.

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