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India Q1 economic growth slips to 5.7 percent

India Q1 economic growth slips to 5.7 percent

Pulled down by sluggish manufacturing, growth in the Indian economy during the first quarter of this fiscal fell to 5.7 per cent, clocking the lowest GDP growth rate under the Narendra Modi dispensation, official data showed on Thursday. "Now with oil prices so low, China ceding space to India, our growth should have been back to well over 8 per cent".

"GDP at constant (2011-12) prices in Q1 of 2017-18 is estimated at 31.10 lakh crore, as against 29.42 lakh crore in Q1 of 2016-17, showing a growth rate of 5.7 percent".

Gross domestic product grew 5.7%in the latest quarter, its slowest pace since the January-March quarter 2014, according to data released on Thursday.

India's first quarter economic growth for the fiscal year 2018 considerably undershot market expectations.

But manufacturing saw the sharpest slowdown in growth, expanding at just 1.2% compared to 10.7% a year earlier. "A continuation of the demonetization slowdown combined with uncertainty around the implementation of GST led to this", T.C.A Anant, the Secretary of the Ministry of Statistics and Programme Implementation said in a briefing. Financial services sector growth was 6.4 percent compared to 9.4 percent a year ago.

Teresa John, Research Analysts at Nirmal Bang predicted India's gross value added or GVA growth to come in at about 6.2% for 1QFY18 while gross domestic product or GDP is likely to register 6.6% growth. Economists use GVA - which is GDP minus taxes - as a more realistic variable to compute the value of goods and services produced. Agriculture, growing at 2.3% could match up to 2.5% seen in the corresponding quarter previous year.

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The mining sector showed a dismal performance during the quarter with a 0.7 per cent contraction in output. "Since it was announced that GST would come into operation from July 1, most manufacturers were de-stocking during period April-June".

"The lingering impact of demonetisation is visible in the low growth of construction".

Industry sector has primarily dragged the Q1 FY'18 GDP growth to its lowest level in 13 quarters. HDFC, for example, was expecting a GVA of around 6.7% on the assumption that consumption spending, government services coupled with buoyancy in agricultural sector would have helped the country post a modest growth in economic activities.

Stating that results of the proceedings against major debtors would dictate how the banking situation improves, he said the process will take time.

Confusion ahead of the launch of a new goods and services tax (GST) also seems to have dampened economic activity. "We are hopeful of a better fourth quarter, but that is crucially dependent on the outcome of resolution of stressed assets that falls due in the fourth quarter", said SBI.