Overall economic expansion cooled to 5.7 percent in the June quarter, data released on Thursday showed, its slackest pace in more than three years.
In terms of Gross Value Added (GVA), which excludes indirect taxes and subsidies, the growth was even lower at 5.6 per cent over the GVA for the corresponding quarter of past year.
The GDP for Q1 stood at Rs 31.10 lakh crore, or a growth of 5.7 per cent, compared with 6.1 per cent in the fourth quarter of the last fiscal. On the effect of demonetisation, he said it impacted growth in the first quarter as by that time the currency shortage triggered by the scrapping of Rs 500 and Rs 1,000 notes on November 9 a year ago was over.
On Thursday, The Central Statistics Office (CSO) released the Gross Domestic Product (GDP) figures which trigger an alarming situation for the government of India. It grew 17.2 percent year-on-year compared with a near 32 percent year-on-year growth in the March quarter. China, which grew at 6.9 per cent in the last two quarters, has bounced back as the world's fastest-growing major economy since January, regaining the status from India after two years. "Corporate entities were pulling down their stocks in April-June, which seems to be in anticipation of GST", Anant said. Farm sector growth was a modest 0.3 percent versus last year's 9.9 percent. "Its performance has been poor, though the sales growth is good", he said.
The figures, coming after India's moral victory at Doklam standoff, could be some embarrassment for the Indian government as India's GDP growth has now slipped below that of China. "I would expect GDP for the full year will be somewhere closer to 6 percent. The decline of GVA could be due to the factors like lingering impact of demonetization and destocking activities undertaken ahead of GST implementation".
Capital investment also rebounded from a 2.1 percent contraction in the March quarter.
Manufacturing growth has gone down from 3.1 per cent to 1.6 per cent. Jaitley linked this decline to GST.
The economy was expected to bounce back after the government's crackdown on black market cash previous year. "The data we saw from November onwards indicated the slowdown had started in second quarter of 2016", he said.
Dr. Anant said the slowdown in the economy had begun in the second quarter of previous year itself, so one can't link it to the impact of demonetisation.
Stating that results of the proceedings against major debtors would dictate how the banking situation improves, he said the process will take time.