Focus on Investment

The First Advance Estimates of National Income, 2017–18 released on 5 January by the Central Statistics Office (CSO) estimates that the economy is growing the slowest it has in the last four years. These estimates, using six to eight months of data on the Indian economy, are used for the formulation of the Union Budget to be presented on 1 February. Notwithstanding the government’s optimism about year-on-year investment growth, gross fixed capital formation (GFCF) as a proportion of gross domestic product (GDP), a key indicator of an economy’s ability to grow, is the lowest since the new National Accounts Statistics (NAS) series began in 2011. Further, there are uncertainties in these estimates because of demonetisation in 2016–17 and the disruptive introduction of the goods and services tax (GST) in 2017–18.

In order to understand what to expect from the data at hand, a quick summary of what it says is in order. The data estimates that real GDP will grow at 6.5% during 2017–18, year-on-year, lower than the 7.1% estimated for the previous financial year. Gross value added (GVA) at constant prices is expected to grow at 6.1% compared to the previous year’s provisional estimates that record growth of 6.6%. The other component of GDP, net taxes on products, is expected to grow slower than last year at 10.9% as the indirect tax revenue collections are slower on account of GST.