NEW DELHI: At 5.7 per cent, India’s economy slowed to a three-year low in the quarter ending June, delivering a blow to the government that is facing fresh criticism over demonetisation. The numbers indicate that the country is yet to recover from the double whammy of cash squeeze and launch of the uniform tax regime. “This is largely due to the demonetisation impact; the economy has failed to recover,” noted economist M Govinda Rao said.
The government, however, denied any impact of demonetisation, but admitted that the roll-out of GST could have had an impact. “Businesses have pulled down their inventory in anticipation of the GST,” said Chief Statistician of India TCA Anant. “As companies adopt GST, their inventory position will become normal,” he said.
The sector that contributed the most to slowing economic growth was manufacturing, which tumbled to 1.2 per cent from 10.7 per cent a year ago. Other sectors that dragged growth down included mining and quarrying, which showed a negative growth of 0.7 per cent, and construction, which grew 2 per cent.
Meanwhile, another set of official data showed that the growth of eight core sectors slowed to 2.4 per cent in July due to contraction in output of crude oil, refinery products, fertiliser and cement.
Anant pointed out that the gross value added (GVA) in April-June quarter (5.6 per cent) was much less than in the same period last year (7.6 per cent). Economists use GVA — which is GDP minus taxes — as a more realistic variable to compute the value of goods and services produced.
Another important matrix — gross fixed capital formation (GFCF) — that reveals corporate investment, also showed a dip. It fell to 29.8 per cent of the GDP (in 2011-12 prices) from 31 per cent in the same quarter last year, indicating that companies had not added capacity lines due to muted demand.
“The numbers seem to suggest that the slowdown from the last quarter has intensified due to the combination of long-term slowdown and temporary shock factors like demonetisation and GST,” said Abheek Barua, chief economist, HDFC. India now lags behind China in global growth rankings by a fair margin. China, which grew at 6.9 per cent in the last two quarters, has bounced back as the world’s fastest-growing major economy since January, regaining the status from India after two years.
Didn’t file returns? I-T is coming
The income-tax department is on the prowl to catch those who have failed to file their tax returns, and as many as 14,000 properties worth over J1 crore each are under scrutiny. While J15,496 crore was admitted as undisclosed income, surveys resulted in the seizure of J13,920 crore, according to an official statement. As many as 13.33 lakh accounts of some 9.72 lakh persons with unusual cash deposits of J2.89 lakh crore were identified and responses sought, the statement added.