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Fall in GDP figures structural, not transient, says SBI report:
Context
- India’s falling GDP in the first quarter of the current fiscal shows underscores the problem as more structural than momentary
Is Goods and Sales Tax the reason for the present fall in GDP?
There has been a lot of talks concerning the manufacturing destocking ahead of GST :
- India’s economic growth slipped to a three-year low of 5.7% cent in April-June, underlining the uncertainty related to the GST
- A significant destocking in both consumer as well as investment intensive sectors was already taking pace in 2016-17
What is being done by the Government?
- The government may cut expenditure to meet the 3.2% target with fiscal deficit touching 92.4% of the budget estimate by the end of July
- In absolute terms, fiscal deficit — the difference between expenditure and revenue — was Rs. 5.04 trillion of budget estimate till July, against 73.7% in the same period last fiscal.
- However, with uncertainties involving GST, it would not be prudent for the government to reduce spending as other growth catalysts are missing.
