CAUSES OF ECONOMIC SLOW DOWN

Economic growth slowed to 5.7 per cent in the first quarter of 2017-18 against 6.1 per cent in the same quarter of 2016-17. The main reasons for this slowdown seem to be demonetization and de-stocking by companies before introduction of GST.  Last year GDS grew by 7.9 percent in the same quarter   This slow down is on account of a sharp deceleration in manufacturing growth, as indicated by the data released by the Central Statistics Office (CSO).

Some segments in the services sector showed a better performance.  “Trade, hotel, transport, communication and services related to broadcasting” picked up by growing at 11.1 per cent in April-June from 8.9 per cent last year, while growth in “public administration, defence and other services” was clocked at 9.5 per cent in April-June as against 8.6 per cent last year.

The Gross Value Added or GVA growth, which serves as a more closely watched estimate for quarterly growth, remained unchanged from the previous quarter at 5.6 per cent in April-June but fell sharply from the 7.6 per cent growth recorded in the April-June quarter last year.

The whole supply chain of various products was de-stocked fearing higher rates of GST.  Due to this many companies have recorded reduced sales in the first quarter. The main fall out of the demonestisation was reduced demand.  This also showed in the reduced number of GDP in the first quarter. This topic was discussed in the finance specialization class today at Mangalmay Institute of Management and Technology.

 

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