GDP growth slumps to 3yr low of 5.

7%
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Indias economy unexpectedly slowed to a three-year low in the April-June quarter, signalling
that business was still hurting from last years shock cash squeeze as well as disruptions ahead of
the rollout of a new tax regime.
Gross Domestic Product (GDP) grew 5.7% in the last quarter, undershooting market
expectations, compared to 6.1% in January-March period. The drop was even sharper when
compared to the like-quarter a year ago when GDP expanded at 7.9%, official data released on
Thursday showed.
The slowdown suggested the underlying momentum in the economy was still weak, posing a
challenge to Prime Minister Narendra Modis government that must produce masses of jobs to
absorb a million people entering the workforce every month.
Certainly a matter of concern that first quarter GDP has come down to 5.7% and its obvious
therefore that it throws up challenge for the economy, finance minister Arun Jaitley said.
The economy lost steam primarily because of a sharp fall in mining, manufacturing and
construction sectors, where demand remained muted even nine months after the government
decided to scrap about 86% of cash in circulation to fight corruption and counterfeiting.
A rush to clear large inventories ahead of the Goods and Services Tax (GST) rollout also
affected manufacturing, Jaitley said, adding that the drawndown in stocks is complete so the dip in
the sector could be bottoming out. The April-June data, however, does not take into account the
impact of the new tax regime launched on July 1.
While manufacturing and construction grew at just 1.2% and 2% respectively, mining output
saw a 0.7% contraction yearon-year. This offset relatively robust expansion in services and a
moderate growth in farm output.
The lingering impact of demonetisation is visible in the low growth of construction, Aditi
Nayar, an economist with ICRA, told Reuters, referring to a segment of the economy where most
people use cash.