The current year’s economic growth rate was reduced by the Indian government last weekend just before the national federal budget is to be prepared and presented by the present government next month.
In recent time, businesses in the country had been hit by the somewhat disorderly launch of the new nationwide tax – goods and services tax (GST), in July last year.
It has been announced earlier by the Finance Minister Arun Jaitley that the government would be able to generate enough taxes to enable the government to hold back the fiscal deficit 3.2 percent of GDP after addressing all of the spending targets and that the growth of the economy would be around 7.5 percent for the 2017/18 fiscal year.
The Ministry of Statistics said in a statement that a slower than the provisional 7.1 percent growth in 2016/17 would be reached by the economy at an grow an annual 6.5 percent in 2017/18 for the country’s gross domestic product.
The severe problems that were faced by the business in the economy due to the unplanned and chaotic roll out of the goods and services tax (GST) was cited by most of the economists not attached with the government who had predicted a growth rate for the Indian economy to be anywhere between 6.2 to 6.5 per cent for this fiscal year.
“The GST transition impact is clearly visible,” said Shubhada Rao, chief economist at Yes Bank. She added that the worst hit were sectors like the manufacturing sector and hotels.
Millions of small businesses were severely hit by the complexity of the rules of GST and the technical glitches in implementing it. The GST is aimed to convert the 29 states of the country with formally separate tax rates into one market and a single customs union.
The government ministry statement said that compared to a growth rate of 7.9 per cent in the last fiscal year, the current rate of growth for the current fiscal would be around 4.6 per cent for the manufacturing sector. There is also an expected slowdown in the farm output from the last year’s rate of 4.9 per cent to 2.1 per cent.
The government would require to resort to debt from the market to cope up with the anticipated loser revenue collections for it due to the slower economic growth in the country, finance ministry officials had earlier said.
(Adapted from CNBC.com)