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GDP growth expected to be slower at 7.1% this year

Note ban impact to be factored into Feb. 28 estimate report

India’s gross domestic output is expected to grow at a slower pace of 7.1 per cent in 2016-17 compared to the 7.6 per cent clocked in the previous year, Chief Statistician TCA Anant said on Friday.

But this doesn’t factor in the impact of the Centre’s decision to scrap high-value currency notes on November 8.

Data from seven months

Stressing that this estimate, which is in sync with the Reserve Bank of India’s economic growth forecast, is largely based on data from the first seven months of the year, Mr. Anant said outcome-based numbers from the September to December quarter would be captured in the next growth projection to be released on February 28.

On growth forecasts by analysts emphasising a negative impact of the note ban, Mr. Anant said, “We don’t produce ad hoc estimates in general… As a conscious approach, we do not use untried, unverified or unsubstantiated methods to make adjustments to GDP.”

Two options

“In the absence of data, there are only two options: you can stay with existing structures and forecast them or, as a lot of people have done, make assumptions about what the structures are. But those are not statistical exercises so it is difficult to argue what the level of confidence in them would be,” he said.

The gross value added (GVA) is estimated to grow 7 per cent in 2016-17 compared with a growth rate of 7.2 per cent in 2015-16. The agriculture sector saw significant growth with its GVA estimated to grow 4.1 per cent in 2016-17 up from 1.2 per cent in the previous year. The service sector in aggregate is expected to grow 7.9 per cent in 2016-17, slower than the 8.1 per cent seen in the previous year.

Manufacturing, on the other hand, is expected to witness a slowdown, with the sector’s GVA to grow 7.4 per cent in 2016-17 down from 9.3 per cent in 2015-16. The projection also factors in a huge jump in Government Final Consumption Expenditure, which is expected to grow 23.8 per cent in 2016-17 compared with 2.2 per cent in 2015-16, part of which could be on account of rise in wage and salary payments, he explained. As for the impact of demonetisation on the next growth estimate, Mr. Anant said: “I don’t think there is any method available that would lead to a higher level of confidence than what we have done. People have lots of expectations but it is a safe practice to stay with whatever is reflected in actual outcome-based data.”

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