GST that led to a growth slowdown on implementation in July 2017 has helped the economy growth at a fast pace, albeit with a base effect. GST is a key indirect tax reform and the government has tweaked rates over the last one year in response to industry dynamics.
India’s GDP growth for the 1st quarter of fiscal 2018-19 came in at 8.2% against 7.7% seen in the 4th quarter of fiscal 2017-18.The previous year first quarter growth was 5.7%, the weakest quarterly growth seen since the base year was changed from 2004-05 to 2011-12, as GST introduction in July 2017 led to manufacturing activity slowing down as producers destocked inventories in the first quarter of fiscal 2017-18.The government has touched 86.5% of its fiscal deficit target as of July 2018.Nominal GDP grew by 13.8% against 8.3% in the previous year.
India 1st quarter 2018-19 GDP by Economic Activity
GDP at constant (2011-12) prices grew at 8.2% for the first quarter of fiscal 2018-19 against growth rate of 7.7% seen in the fourth quarter of fiscal 2017-18. GVA or Gross Value Add at basic price (GVA at basic prices = GVA at factor cost + net production taxes where net production taxes = production taxes – production subsidies) grew by 8.0%.
Agriculture grew by 5.3% against 4.5% growth seen in the fourth quarter of 2017-18. Mining and quarrying grew 0.1% against 2.7%, Manufacturing growth picked up at 13.5% against 9.1%, electricity grew by 7.3% against 7.7% and construction grew by 8.7% against 11.5%. In the services sector, trade, hotels, transport, communication & services related to broadcasting grew strongly by 6.7% against 6.8%, financial, real estate & professional services grew 5% against 2.2% and public administration, defence and other services grew by 9.9% against 11%.
India 1st quarter 2018-19 GDP by Expenditure
Private Final Consumption Expenditure (PFCE) at constant (2011-12) prices is estimated at 54.9% for the first quarter of fiscal 2018-19 against 54.6% for the fourth quarter of fiscal 2017-18. Government Final Consumption Expenditure (GFCE) is estimated at 11.9% against 9.5%. Gross Fixed Capital Formation ( GFCF) is estimated at 31.6 % against 32.2%.
FY19 Real GDP from the supply side (2011-12 base)
Real GDP from the supply side | y-o-y growth, % | - | - | - | - | % share in GDP | - | - | - | - |
2011-12 base | 2015-16 | 2016-17 | 2017-18 | Q1 2017-18 | Q1 2018-19 | 2015-16 | 2016-17 | 2017-18 | Q1 2017-18 | Q1 2018-19 |
Agriculture, Forestry and fishing | 1.32 | 4.88 | 3.37 | 3 | 5.3 | 15.38 | 15.16 | 14.82 | 13.61 | 13.27 |
Industry | 7.39 | 5.59 | 5.54 | 0.13 | 10.29 | 31.26 | 31.16 | 31.22 | 30.66 | 31.32 |
Services | 8.91 | 7.74 | 7.92 | 9.48 | 7.35 | 53.36 | 53.24 | 53.96 | 55.73 | 55.41 |
Total GVA | 7.2 | 7.1 | 6.5 | 5.6 | 8 | 100 | 100 | 100 | 100 | 100 |
GDP (total GVA plus net product taxes) | 7.6 | 7.1 | 6.7 | 5.6 | 8.2 | - | null | null | - | - |
FY19 Sub-components of the supply side-GDP (2011-12 base), % y-o-y growth
Sub-components of the supply side-GDP | % Share of GDP Q1 2018-19 | 2015-16 | 2016-17 | 2017-18 |
Agriculture, forestry and fishing | 13 | 0.7 | 6.3 | 3.4 |
Industry, of which | - | - | - | - |
Mining and quarrying | 3 | 10.5 | 13.0 | 2.9 |
Manufacturing | 18 | 10.8 | 7.9 | 5.7 |
Electricity, gas, water supply & other utility services | 2 | 5.0 | 9.2 | 7.2 |
Construction | 8 | 5.0 | 1.3 | 5.7 |
Services, of which | - | - | - | - |
Trade, repair, hotels and restaurants | 19 | 10.5 | 7.2 | 8.0 |
Financial, real estate & business services | 24 | 10.8 | 6.0 | 6.6 |
Community, social & personal services | 12 | 6.9 | 10.7 | 10.0 |
TOTAL GVA growth rate | 100 | 7.9 | 7.1 | 6.5 |
Q1FY19 Real GDP from the demand-side (2011-12 base)
- | y-o-y growth, % | - | - | - | % share in GDP | - | - | - |
Year | 2015-16 | 2016-17 | 2017-18 | Q12018-19 | 2015-16 | 2016-17 | 2017-18 | Q12018-19 |
Private Final Consumption expenditure | 6.1 | 7.3 | 6.6 | 8.6 | 55.52 | 55.9 | 55.8 | 54.91 |
Government final consumption expenditure | 3.3 | 12.2 | 10.9 | 7.56 | 9.93 | 10.3 | 10.8 | 11.77 |
Gross fixed capital formation | 6.5 | 10.1 | 7.6 | 10.03 | 31.2 | 31.1 | 31.4 | 31.57 |
Exports | -5.3 | 5 | 5.6 | 12.71 | 20.95 | 20.4 | 20.2 | 21.35 |
Imports | -5.9 | 4 | 12.4 | 12.53 | 22.83 | 21.4 | 22.6 | 24.72 |
GDP at 2011-12 prices | 8 | 7.1 | 6.7 | 8.2 | - | - | - | - |
Understanding the Revised GDP Numbers after Base Year Change
The Indian economy grew by 6.9% in 2013-14 (fiscal year that ended in March-2014), dramatically faster than the earlier estimate of 5%, as per the revised data from Central Statistical Organization (CSO). The new estimates revise the base year for GDP calculations to 2011-12 from 2004-05 earlier, and also incorporate the international methodology for the estimation of GDP.
We see below what changes CSO has done and how has it affected the GDP estimates.
1. CSO will now report ‘gross value added’ (GVA) at basic prices for industry-level GDP instead of GDP at factor cost that it earlier released. What does it mean?
a) GVA at basic prices = GVA at factor cost + net production taxes
where net production taxes = production taxes – production subsidies
Production taxes are levied as lump sum taxes on production and do not depend on the volume of production. Examples include land revenues, stamp and registration fees, and professional taxes.
Production subsidies are generally subsidies paid to producers on inputs to lower the cost of production. Eg; subsidies to farmers, small and village enterprises, and railways so on.
GVA at factor cost is the same as GDP at factor cost that CSO used to report earlier.
b) GVA at basic prices = compensation of employees + operating surplus/mixed income + consumption of fixed capital (depreciation)
In short, GVA at basic prices uses the income method for GDP calculation – it is sum of income earned by the factors of production, namely labour and capital. This gives valuable information about the share of labour and capital in each industry and in the national income.
These changes are in line with the internationally followed methodology for calculating GDP. For 2013-14, real GVA at basic prices (with 2011-12 base) has been estimated at Rs 91.7 trillion
2. CSO will now on refer to ‘GDP at market prices’ as ‘GDP’
GDP at market prices (GDP) = sum of GVA at basic prices for all industries + net product taxes
where net product taxes = product taxes – product subsidies
Product taxes and subsidies are levied on per unit of production. Examples of product taxes are excise tax, sales tax, service tax and custom duties. Product subsidies are food, fertilizer, petroleum subsidies, interest and insurance subsidies to farmers and households
For 2013-14, real GDP at market prices (with 2011-12 base) has been estimated at Rs 99.2 trillion. For 2013-14, nominal GDP at market prices (with 2011-12 base) has been estimated at a level similar to the earlier estimate with the 2004-05 base – around Rs 113 trillion. Therefore, at the current prices, the size of the economy remains largely unchanged.
3. What are the other changes that CSO has done to the methodology and coverage of calculating GDP?
a) CSO has incorporated updated information from its sources – improved coverage of local bodies, incorporation of the NSS surveys on un-incorporated enterprises and the employment-unemployment surveys
b) incorporated new sources of data – expansion of the coverage for industry and services firms using data filed by companies under the Ministry and Commerce e-governance initiative
c) Additional changes to the methodology for calculating the sub-components of GDP – For example; trade carried out by the manufacturing companies is now the part of the manufacturing sector which was earlier covered in ‘trade’ under the services sector.
4. With the above changes, what was the GDP growth last year?
As per the new estimates, real GDP grew by 6.9% in 2013-14 compared to the earlier estimate of 5%. The upward revision in growth came from revision in manufacturing and mining growth. As per the earlier estimates, both of these sectors had recorded negative growth in 2013-14, but are now estimated to have grown over 5% last year. As a result, the share of industry (mining, manufacturing, utilities and construction) was upwardly revised to nearly 32% for 2013-14.
5. How have GDP growth estimates from the demand-side altered with the revisions?
With these changes in place, CSO has now not only revised the GDP estimates for the past three years, but also released valuable and more detailed information than available earlier at the industry-level and also for the pattern of consumption expenditure, savings and capital formation. It will be useful if CSO released the back-series for the earlier years’ as per the new method, so that a longer time-series is available to the policymakers, investors and researchers.As per the new estimates, fixed investment grew by 3.0% last year compared to the earlier estimate of 0.2%. Similarly, both growth in private consumption and government consumption have been revised up significantly.
6.What are the implications of these revisions for the monetary policy?
With these significantly upward revisions in GDP, the inevitable question which arises is in terms of its implication for the policies, especially the monetary policy. RBI in its 3rd February 2015 policy review indicated that it is reviewing the new GDP numbers and will then start using it for policy reference.
India’s GDP Growth – Previous Quarters
India’s 4th quarter fiscal 2017-18 GDP growth came in better than expectations at 7.7% and all indicators point to a robust 1st quarter fiscal 2018-19 GDP growth. The growth for 1st quarter fiscal 2018-19 will also look much better due to low base last year that saw GDP growth at 5.6% for the 1st quarter of fiscal 2017-18.
Indicators such as Vehicle Sales, Consumer Finance, Consumption, Travel, Construction for this quarter looks positive. Corporate performance has largely been strong for the 4th quarter of fiscal 2017-18 and guidance from companies have been positive.
India 4th Quarter Fiscal 2017-18 GDP
India’s GDP growth for the fourth quarter of fiscal 2017-18 came in at 7.7% against 7.0% growth seen in the third quarter of fiscal 2017-18. India nominal GDP for fourth quarter of fiscal 2017-18 came in at 10.9% against 11% growth seen in the third quarter of fiscal 2017-18.
Rapid growth in agriculture at 4.5%, manufacturing at 9.1% and construction sectors at 11.5% contributed to the overall growth.
At the sectoral level, the growth rate of GVA at constant (2011-12) prices in Q4 of 2017-18 for agriculture & allied sectors, industry and services sectors are estimated at 4.5%, 8.8%, and 7.7% respectively. The rate of growth of gross fixed capital formation at constant prices increased to 14.4% in the fourth quarter on account of 9.0% growth in capital goods in Q4 of 2017-18.
India 4th quarter 2017-18 GDP by Economic Activity
GDP at constant (2011-12) prices grew at 7.7% for the fourth quarter of fiscal 2017-18 against the growth rate of 7.0% seen in the third quarter of fiscal 2017-18. GVA or Gross Value Add at basic price (GVA at basic prices = GVA at factor cost + net production taxes where net production taxes = production taxes – production subsidies) grew by 7.6% against 6.6% growth seen in the third quarter of fiscal 2017-18.
Quarterly Estimates of 4th quarter GVA at Basic Prices for 2017-18
Agriculture up by 4.5% against 3.1% growth seen third quarter of 2017-18. Mining and quarrying grew 2.7% against 1.4%, Manufacturing growth accelerated to 9.1% against 8.5%, electricity grew by 7.7% against 6.1% and construction grew by 11.5% against 6.6%.
In the services sector, trade, hotels, transport, communication & services related to broadcasting grew 6.8% against 8.5%, financial, real estate & professional services grew 5% against 6.9% and public administration, defense and other services grew by 13.3% against 7.7%.
India 4th quarter 2017-18 GDP by Expenditure
Contribution of Private Final Consumption Expenditure (PFCE) in GDP at constant (2011-12) prices is estimated at 54.6% for the fourth quarter of fiscal 2017-18 against 59.3% for the third quarter of fiscal 2017-18. Government Final Consumption Expenditure (GFCE) is estimated at 9.5% against 10%. Gross Fixed Capital Formation (GFCF) is estimated at 32.2% against 31.6%.
Quarterly Estimates of Expenditures of GDP for 2017-18 (at 2011-12 prices)
- | Value in Crore | Value in Crore | Value in Crore | % share in GDP | % share in GDP1 | % share in GDP2 |
- | Q4 2017-18 | Q3 2017-18 | Q4 2016-17 | Q4 2017-18 | Q3 2017-18 | Q4 2016-17 |
Private Final Consumption expenditure | 1898844.00 | 1923991.00 | 1779784.00 | 54.6 | 59.3 | 55.2 |
Government final consumption expenditure | 331031.00 | 325145.00 | 283296.00 | 9.5 | 10.0 | 8.8 |
Gross fixed capital formation | 1118528.00 | 1024006.00 | 977537.00 | 32.2 | 31.6 | 30.3 |
Change in Stocks | 25873.00 | 22935.00 | 24002.00 | 0.7 | 0.7 | 0.7 |
Valuables | 59186.00 | 51654.00 | 45828.00 | 1.7 | 1.6 | 1.4 |
Exports | 679160.00 | 656006.00 | 655470.00 | 19.5 | 20.2 | 20.3 |
Less Imports | 727508.00 | 746691.00 | 656235.00 | 20.9 | 23.0 | 20.3 |
Discrepancies | 91713.00 | -13558.00 | 117526.00 | 2.6 | -0.4 | 3.6 |
GDP | 3476827.00 | 3243489.00 | 3226958.00 | - | - | - |
GDP Growth rates | 7.7 | 7 | 6.1 | - | - | - |
Quarterly Estimates of GVA at Basic Prices for 2017-18 (at 2011-12 prices) | Q4 2017-18 | Q3 2017-18 | Q4 2016-17 |
Agriculture, forestry and fishing | 4.5 | 3.1 | 7.1 |
Mining and quarrying | 2.7 | 1.4 | 18.8 |
Manufacturing | 9.1 | 8.5 | 6.1 |
Electricity, gas, water supply & other utility services | 7.7 | 6.1 | 8.1 |
Construction | 11.5 | 6.6 | -3.9 |
Trade, repair, hotels and restaurants | 6.8 | 8.5 | 5.5 |
Financial, real estate & business services | 5.0 | 6.9 | 1.0 |
Public administration, defence and Other Services | 13.3 | 7.7 | 16.4 |
GVA at Basic Prices | 7.6 | 6.6 | 6.0 |
India third Qtr 2017-18 GDP Growth
Second advance estimates of GDP growth for fiscal 2017-18 shows that India’s real GDP is expected to grow at 6.6% against 7.1% in the previous year. GST implementation is stabilising, which augurs well for economic activity. Early signs of revival in investment activity as reflected in improving credit offtake, large resource mobilisation from the primary capital market and improving capital goods production and imports, can lead to strong GDP growth in the coming quarters.
RBI estimates GVA growth at 6.6% for fiscal 2017-18 and in a range of 7.3% to 7.4% in the first half of next fiscal year and 7.1% to 7.2% in the second half .
India’s GDP growth for the third quarter of fiscal 2017-18 came in at a growth of 7.2% against 6.5% seen in the second quarter of fiscal 2017-18.The economic activities that grew above 7.0% in third quarter of 2017-18 over previous years include manufacturing, trade, hotels, transport, communication and services related to broadcasting, public administration, defence and Other Services.
Nominal GDP grew by 11.9% against targeted levels of 11.5%.CPI printed at 5.07% and WPI at 2.84% respectively in January 2018.RBI upped its inflation estimate for the January-March 2018 period to 5.1% from 4.3% to 4.7% range as previously estimated. Inflation expectations for the first half of fiscal 2018-19 is 5.1% to 5.6% and for the second half is 4.5% to 4.6%
India 3rd quarter 2017-18 GDP by Economic Activity
GDP at constant (2011-12) prices grew at 7.2% for the third quarter of fiscal 2017-18 against growth rate of 6.5% seen in the second quarter of fiscal 2017-18. GVA or Gross Value Add at basic price (GVA at basic prices = GVA at factor cost + net production taxes where net production taxes = production taxes – production subsidies) grew by 6.7% against 6.2% growth seen in the second quarter of fiscal 2017-18.
Agriculture piced up by 4.1% against 2.7% growth seen second quarter of 2017-18. Mining and quarrying degrew -0.1% against 7.1% , Manufacturing growth accelerated to 8.1% against 6.9%, electricity grew by 6.1% against 7.7% and construction grew by 6.8% against 2.8%.In the services sector, trade, hotels, transport, communication & services related to broadcasting grew 9.0% against 9.3%, financial, real estate & professional services grew 6.7% against 6.4% and public administration, defence and other services grew by 7.2% against 5.6%.
India 3rd quarter 2017-18 GDP by Expenditure
Contribution of Private Final Consumption Expenditure (PFCE) in GDP at constant (2011-12) prices is estimated at 59.05% for the third quarter of fiscal 2017-18 against 53.9% for the second quarter of fiscal 2017-18. Government Final Consumption Expenditure (GFCE) is estimated at 9.9% against 12.5%. Gross Fixed Capital Formation (GFCF) is estimated at 32.4% against 28.9%.
Nominal GDP Growth of 9.5% for Fiscal 2017-18 – First Advance Estimates
India’s GDP at current prices is estimated to have grown by 9.5% for fiscal 2017-18 as per the first advance GDP report published by the CSO. In fiscal 2016-17 nominal GDP growth was 11%. Higher nominal GDP growth is required for India to service its debt and keep fiscal deficit ratios under control.For fiscal 2017-18 budgeted forecast for nominal GDP growth was 11.88% . Lower than forecast for nominal GDP growth will take up the fiscal deficit as percentage of GDP as the fiscal deficit will be higher given that the government is borrowing an additional Rs 500 billion this year to meet revenue shortfall. Fiscal deficit was pegged at 3.2% of GDP for this fiscal year.
India’s Real GDP growth has been estimated downwards to 6.5% against 7.1% in 2016-17. Growth has been expected to weaker this fiscal due to lower growth in agricultural and manufacturing sector due to implementation of GST.GDP growth is expected to be lowest in the last 4 years.
First Advance Estimates for India GDP for Fiscal 2017-18 by Economic Activity
GVA or Gross Value Add at basic price (GVA at basic prices = GVA at factor cost + net production taxes where net production taxes = production taxes – production subsidies) estimated to grow by 6.1% for fiscal 2017-18 against 6.6% in the previous fiscal. Agriculture to be weaker at 2.1% (4.9% growth seen in the fiscal 2016-17). Mining and quarrying expected to grow 2.9% (1.8%), Manufacturing expected to slow 4.6% (7.9%),electricity expected to be stable growth against previous years by 7.5% (7.2%) and construction growth estimated at 3.6% (1.7%). In the services sector, trade, hotels, transport, communication & services related to broadcasting to pick up by 8.7% (7.8%), financial, real estate & professional services to attain 7.3% (5.7%) and public administration, defence and other services expected at 9.4% (11.3%).
India First Advance Estimates of Fiscal 2017-18 GDP by Expenditure
Private Final Consumption Expenditure (PFCE) at constant (2011-12) prices is estimated at 55.74% for fiscal 2017-18 against 55.8% for fiscal 2016-17. Government Final Consumption Expenditure (GFCE) is estimated at 11.2% ( 10.99%). Gross Fixed Capital Formation (GFCF) is estimated at 28.99% (29.54).
RBI Neutral Policy Stance to Continue – India second Qtr 2017-18 GDP Growth
GDP growth at 6.3% for 2nd quarter of fiscal 2017-18 against a backdrop of GST issues, and monsoons bodes well for the 3rd and 4th quarter growth rates of the economy. Nominal GDP was below budget forecasts indicating weakness in prices. Going by equity markets, record high levels of Sensex & Nifty indicate high growth in corporate revenues and earnings, which is likely to show up in GDP growth rates in the 2nd half of fiscal 2017-18.
RBI revised its GDP growth forecast from over 7% to 6.7% for this fiscal year and given that growth is rising, the central bank will not be required to lower rates to provide a monetary boost to growth.
India’s GDP growth for the second quarter of fiscal 2017-18 came in at a growth of 6.3% against 5.7% seen in the first quarter of fiscal 2017-18. The government has touched 96% of its fiscal deficit target as of October 2017.
The economic activities which grew above 6.0% in second quarter of 2017-18 over previous years include trade, hotels, transport & communication and services related to broadcasting,manufacturing,electricity, gas, water supply and other utility services and.
Nominal GDP grew by 9.4% against targeted levels of 11.5%.CPI printed at 3.58% and WPI printed at 3.59% respectively in October 2017.The CPI rose of 3% during second quarter of 2017-18 as compared to growth of 5.2% percent during second of 2016-17.
India 2nd quarter 2017-18 GDP by Economic Activity
GDP at constant (2011-12) prices grew at 6.3% for the second quarter of fiscal 2017-18 against growth rate of 5.7% seen in the first quarter of fiscal 2017-18. GVA or Gross Value Add at basic price (GVA at basic prices = GVA at factor cost + net production taxes where net production taxes = production taxes – production subsidies) grew by 6.1%.
Agriculture grew slowly by 1.68% against 2.3% growth seen first quarter of 2017-18. Mining and quarrying rose 1.68% against -0.7% , Manufacturing growth picked up to 6.97% against 1.2%, electricity grew by 7.59% against 7% and construction grew by 2.64% against 2%.In the services sector, trade, hotels, transport, communication & services related to broadcasting grew strongly 9.93% against 11.1%, financial, real estate & professional services grew 5.7% against 6.4% and public administration, defence and other services grew by 5.99% against 9.5%.
India 2nd quarter 2017-18 GDP by Expenditure
Contribution Private Final Consumption Expenditure (PFCE) at constant (2011-12) prices is estimated at 53.9% for the second quarter of fiscal 2017-18 against 54% for the first quarter of fiscal 2017-18. Government Final Consumption Expenditure (GFCE) is estimated at 12.5% against 12.6%. Gross Fixed Capital Formation ( GFCF) is estimated at 28.9 % against 29.8%.
