GDP slowdown in Q1 due to ‘higher subsidy expenditure’: Finance Ministry

“The slowdown is mainly because from Q1 itself, we have started releasing subsidy allocations to the food, petroleum and fertiliser side, so that is the main factor,” the economic affairs secretary said.

The govt expressed confidence that good monsoon and impact of pay commission award will push the economic growth close to eight percent in the current fiscal.

The Finance Ministry has attributed the slowdown in first quarter Gross domestic product (GDP) to ‘higher subsidy expenditure’. It, however, expressed confidence that good monsoon and impact of pay commission award will push the economic growth close to eight percent in the current fiscal.

“Given the good monsoon which we had this year, the Seventh Pay Commission payout effect and various structural reform measures which the government has taken we expect the growth to be higher than what we achieved last year (7.6 per cent), perhaps close to 8 per cent,” Economic Affairs Secretary Shaktikanta Das told reporters on August 31.

Responding to the CSO data which revealed that India’s GDP growth slowed to six-quarter low of 7.1 per cent in April-June period of the 2016-17 fiscal, he said, “The Indian economy April-June quarter GDP growth is at 7.1 per cent, which is lower than before. The main reason is on account of higher subsidy expenditure, the net indirect taxes have gone down.”

“The slowdown is mainly because from Q1 itself, we have started releasing subsidy allocations to the food, petroleum and fertiliser side, so that is the main factor,” he added.

The GDP growth data is calculated under the new methodology at market price, while GVA is calculated primarily at factor cost. GDP is GVA plus taxes on products minus subsidies on them.