The Gross Value Added (GVA) growth plummeted to a two-year low of 5.6 per cent and Gross Domestic Product (GDP) growth to 6.1 per cent in January-March, the lowest in at least four quarters, reflecting the impact of demonetisation that happened in the preceding quarter, but a closer look at the core GVA growth numbers reveals a far deeper impact of the note ban decision on the country’s economic growth.
Among total eight sectors, ‘Public administration, defence and other services’ sector recorded the highest GVA growth of 17.0 per cent in the fourth quarter of 2016-17. But, if one excludes the high rate of growth seen in the sector, the overall GVA growth of remaining seven sectors fell sharply to 4.1 per cent.
Manufacturing, construction and financial services sectors were among the worst hit sectors in the January-March quarter. Excluding both agriculture and public administration sectors, the core GVA growth fell even lower to 3.8 per cent as against 10.7 per cent in the same period last year.
“As evident, core GVA has been on a continuous declining trend from Q4FY16 and has now touched a nadir at 3.8 per cent. On the other hand, non-core GVA has been on a slow upward trend since Q4FY16. It is thus clear that Non Core GVA growth has been unable to pull up Core GVA growth in FY17. In fact, the decline in Core GVA has been much faster as compared to a rather modest increase in Non Core GVA,” SBI’s Chief Economic Adviser Soumya Kanti Ghosh said in a report.
For the whole year 2016-17, however, the impact was not this pronounced in view of over 7 per cent growth seen in the first three quarters. For 2016-17 exclusion of government spending and agriculture shows a GVA growth rate of 6.2 per cent as against 6.6 per cent estimated for all sectors.
In line with the recent revision in the WPI and IIP, there was a significant upward revision in growth for April-June quarter, with GDP growing at 7.9 per cent in the revised series as against 7.2 per cent growth estimated earlier. As per the new series, GDP growth was recorded at 7.5 per cent in July-September compared with earlier estimate of 7.4 per cent, while it remained unchanged at 7.0 per cent for October-December quarter.
The decline in GDP growth for 2016-17 to 7.1 per cent growth from 8.0 per cent in the previous year comes on the back of weak private investment even as government expenditure recorded an increase. Gross Fixed Capital Formation, the proxy for private investment, declined sharply to 2.4 per cent in 2016-17 from 6.5 per cent in the previous year.