India’s GDP fall is being attributed to the slowdown caused by note ban and GST, but a report published by State Bank of India (SBI) says that the fall in GDP points out to structural issues and it may not be temporary, as is being highlighted. It may be recalled that India’s GDP growth fell to 5.7 percent in April-June, raising concerns about the future of Indian economy. The SBI report says that the impact of Goods and Services Tax (GST) on the GDP has been over emphasized. The report says that manufacturing destocking ahead of GST launch is being considered to be the reason for fall in GDP. However, a significant destocking was already visible in 2016-17 in both consumer and investment intensive sectors, the report has stated.
The report also talks about the fiscal deficit, saying that the government may cut expenditure to meet the target of 3.2 percent, since the fiscal deficit has already touched 92.4 percent of the budget estimate by the end of July. The report supports a cut in government spending since uncertainties related to GST will prevail in the coming months and monetary policy support to growth is not forthcoming. The report was based on a survey of 1,695 listed firms. The report also suggests that the government should use the increased collections through GST to push capex instead of shoring up revenue numbers.