Happy with Q2 GDP numbers? Wait till the final benefits of GST are realised

Published On: 01, Dec 2017 | Source: financialexpress.com

India’s GDP growth in the second quarter (Jul-Sep) accelerated to 6.3 percent from 5.7 percent in Apr-Jun

India’s GDP growth recorded a sharp rebound to 6.3 percent in fiscal second quarter July-September from a three-year low in the first quarter, according to the data released by Central Statistics Office on Thursday. However, the number could see a further upward revision once indirect tax collections are finalised, as per government officials. India’s Chief Statistician, TCS Anant, is optimistic that the GDP data for the second quarter could see an uptick when the government releases its revised estimates as it would reflect the final indirect tax collections, a figure that would include the taxes collected from the late filers as well. If expectations turn out to be a reality, it will be another shot in the arm for the central government’s economic policies. India’s GDP growth in the second quarter (Jul-Sep) accelerated to 6.3 percent from 5.7 percent in Apr-Jun and 6.1 percent in Jan-Mar as businesses sprung into economic activity ahead of a condensed festive season and accelerated production to build inventory after the implementation of GST.

Even Finance Secretary Hasmukh Adhia on Thursday said there may be an underestimation in the second quarter GDP growth rate figure of 6.3 percent, which could go up further after the real picture about the indirect taxes becomes clear. Referring to TCA Anant’s remarks while releasing the GDP figures, he said even the Chief Statistician “was not too sure” whether this is the final number. Adhia said while calculating the GDP figure this time, the indirect tax number that was taken was based on certain calculations. “Now he (Anant) himself was not too sure whether this is the final number. Because he said that in the previous regime, people knew what their tax liability was because the regime was well-settled,” Adhia said.

“It is likely when revised tax estimates are prepared, indirect tax collections may actually be higher than reported,” TCA Anant had said, adding the that Q2 GDP number showed a significant trend reversal. “We will be monitoring the implementation of the GST for some more time,” TCA Anant added. “GDP is derived by adding taxes on products, net of subsidies on products, to GVA at basic prices. The taxes on products include both GST and non-GST Revenue of Central and State Governments,” Ministry of Statistics & Programme Implementation said in a statement. “GDP is derived by adding taxes on products, net of subsidies on products, to GVA at basic prices,” it added.

A sharp bounce in manufacturing growth rate at 7 percent in July-September from 1.2 percent in the preceding quarter was among the primary drivers behind the second quarter GDP growth acceleration. On the other hand, farm growth slowed in the second quarter to 1.7 percent from 2.3 percent in the preceding three-month period. Agricultural production in the second quarter was held up due to poor crop output, India’s Chief Statistician TCA Anant said. Construction activity also recorded a decent expansion with a growth rate of 2.6 percent in July-September vs 2 percent in the previous quarter. The industrial activity also saw a spike in 5.8 percent growth rate in the second quarter vs 1.6 percent in the first quarter. Electricity output growth at 7.6 percent vs 7 percent also supported economic growth.