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Economy to grow less than 7% in FY18: Forecasters

NEW DELHI: India's economy is likely to grow 6.4-6.7% in the current fiscal, down from 7.1% in 2016-17, independent experts said ahead of the release of first official estimate on Friday. The national economy expanded 6% in the first half of the year, with growth improving to 6.3% in July-September from a three-year low of 5.7% in the previous quarter. GDP grew 7.1% in 2016-17 while gross value added or GVA was 6.6%. 


Some of the recent indicators have pointed to a recovery - core sector growth hit a 13-month high of 6.8% in November while manufacturing Purchasing Managers' Index scaled a five-year high. 


The Reserve Bank of India has retained its economic growth projection for 2017-18 at 6.7% saying that the risks are evenly balanced. 


Most independent economists, however, said that they expect GVA to grow 6.5% in 2017-18. "All indicators do not show a structural recovery. Credit growth is yet to pick up and output gap has not closed till now," said Indranil Pan, chief economist at IDFC Bank. 


GVA is the total value of goods and services produced in the economy after deducting the cost of inputs and raw materials used for them. 


Net taxes on products are added to GVA to arrive at GDP where net taxes are taxes on products less subsidies on products. Most analysts now prefer to focus on GVA given the uncertainty in indirect taxes. GVA and GDP had grown 5.6% and 5.7% respectively in the first quarter.


The decline in first quarter growth was largely due to disruption caused by roll-out of GST and the impact of demonetisation. The second quarter of 2017-18 saw GDP growth of 6.3% and GVA of 6.1%. Although the expected revival in economic activity is attributed to a turnaround in industrial growth, the Index of Industrial Production or IIP grew 2.5% in April-October compared with 5.5% a year ago. 


The statistics office will release advance growth estimates for FY18 on Friday. Axis Bank chief economist Saugata Bhattacharya said that overall agriculture is looking robust and manufacturing is looking up which will help boost growth especially in the ongoing last quarter of the fiscal. 


India Ratings and Research has forecast GDP to grow 6.7% but Devendra Kumar Pant, chief economist at India Ratings, said this growth is difficult to achieve given the growth performance in the first half of the year. In the six months ended September 2017, GDP grew 6% compared with the 7.7% growth registered in the first half of 2016-17. 


Ratings firm ICRA has forecast 6.7% GDP growth this fiscal, factoring in a revival in growth in the fourth quarter. 


Source: economictimes.indiatimes.com

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