India’s GDP in Q4 grows 6.1%, loses fastest growing economy tag

India’s GDP or gross domestic product grew 6.1 per cent year-on-year during the January-March period, government data showed on Wednesday. With this, India loses its status of the world’s fastest growing economy. China’s GDP grew 6.9 per cent during the same quarter.The GDP growth rate for the full year (2016-17 ) came in at 7.1 per cent in line with official estimate compared to a revised growth figure of 8 per cent in FY16.A Reuters poll of 35 economists, had predicted India’s fourth quarter GDP growth at 7.1 per cent. During the previous quarter (October-December) India’s GDP grew at 7 per cent.Wednesday’s GDP data, that missed Street expectations will be a disappointment for the Narendra Modi government that completed three years at the Centre last week. PM Modi’s demonetisation drive that outlawed high-value currency notes last year in November in a bid to curb black money likely had an impact on the GDP numbers, analysts said."Q4 data is definitely disappointing and clearly reflects some amount of extreme impact from demonetisation. Based on the quarterly numbers, we can expect a strong commentary from the central bank (RBI) in their next policy meet," Tirthankar Patnaik, India strategist, Mizuho Bank said. The Reserve Bank of India's (RBI) monetary policy review is due early next month.Yes Bank's chief economist Shubada Rao also felt that demonetisation had a role to play in the lower than expected numbers. "The lower-than-anticipated fourth quarter GDP number reflects the lingering impact of demonetisation," she said.During the reporting quarter, the agriculture, forestry and fishing sectors grew at 5.2 per cent; mining and quarrying at 6.4 per cent; manufacturing at 5.3 per cent; electricity, gas, water supply and other utility services at 6.1 per cent; trade, hotels, transport and communication at 6.5 per cent; financial, real estate and professional services at 2.2 per cent; and public administration, defence and other services at 17 per cent. However, the construction sector shrank 3.7 per cent.The fourth quarter GDP data was expected to get a boost from the revision in the IIP or Index of Industrial Production and WPI or Wholesale Price Index series to the 2011-12 base. Brokerage firm Nirmal Bang predicted a boost of about 20-30 basis points during the reporting quarter. The Central Statistical Office ( CSO ) earlier this month revised IIP and WPI series, changing the base year to 2011-12 from 2004-05.However, global ratings agency Moody's Investors Service on Wednesday said it expects India’s GDP to gradually accelerate to around 8 per cent over the next three to four years. The Indian economy will grow by 7.5 per cent during financial year ending March 31, 2017 (FY17) and 7.7 per cent in the fiscal year 2018, it said.India’s biggest tax reform since independence in 1947, the GST or Goods and Services Tax is also expected to contribute 2 per cent to the country’s GDP. GST that aims to subsume all central and state taxes will be rolled out across the country on July 1, bringing India under a single tax regime. The contribution to GDP will happen eventually and the impact will be weighable by FY18, say economists.Most economists, however, don’t take India's GDP figures at face value after a change in methodology two years back that transformed a sluggish economy into a world-beater overnight.What is encouraging though is this year monsoon rains have hit the Kerala coast early raising prospects of a good harvest that will boost farm incomes. And with government pay hikes also in the works, the outlook for a sustained recovery looks good. However, analysts still worry over India's uneven growth and ground realities. While private sector investment continues to be subdued, the country’s state banking sector is laden with bad debts.(With inputs from Reuters)