India’s economy unexpectedly slowed to a three-year low in the April-June quarter, signalling that business was still hurting from last year’s 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%.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. The April-June data, however, does not take into account the impact of the new tax regime launched on July 1. The Gross Value Added, a more appropriate measure of economic expansion that leaves out indirect taxes and subsidies, remained flat at 5.6% over the past quarter but significantly lower than the 7.6% a year ago. Gross fixed capital formation (GFCF), a measure of private investment in the economy, grew 1.16% during the quarter compared to 7.39% in the same period in 2016.

(Hindustan Times)