India’s GDP growth rate hits a three-year low of 5.7% in June quarter

India's economic growth slipped to a three-year low of 5.7 per cent in April-June as disruptions caused by demonetisation spilled over to the third straight quarter amid slowdown in manufacturing activities.

The government played down the lackadaisical growth rate, saying that it was a “one-off affair” due to the destocking activities undertaken ahead of the Goods and Services Tax (GST) rollout.

The GDP had grown by 6.1 per cent in the previous quarter. This compares with revised growth of 7.9 per cent in the first quarter of 2016-17.

The data, which paints a glum picture of India’s post-demonetisation economy, was on Thursday released by the Central Statistics Office (CSO).

Communist Party of India (Marxist) leader Sitaram Yechury said on Twitter that the GDP growth figure of 5.7 per cent would have translated to 3.5 per cent had the old formula still been in place. The figure of 3.5 per cent would have been the worst in decades, he noted.

Finance news website Money Control notes that the new figure indicate that China is now again the world’s fastest growing economy, growing at 6.9 per cent in the last two quarters. India had been the world’s fastest growing economy for two years before the quarter ending January.

Decelerating growth in the manufacturing sector is being viewed as the primary reason for the slump in growth, according to chief statistician TCA Anant. The manufacturing sector grew by just 1.2 per cent in the June quarter, compared to 10.7 per cent in the same quarter last year.

The infrastructure and farming sector were the bright spots in the quarter, both registering an acceleration on account of increased spending on steel and electricity sectors and timely monsoon respectively, media reports said, citing government data.

The growth rate of Gross Value Added (GVA), which is GDP minus taxes, also witnessed a year-on-year decline in April-June quarter. The GVA growth for the quarter was 5.6 per cent, compared to 7.6 per cent during the corresponding quarter last year.