NEW DELHI: India’s GDP growth unexpectedly slumped to a threeyear low in the June quarter as manufacturers sought to get rid of stocks, rather than making more of them, ahead of the July 1rollout of the goods and services tax (GST) amid the lingering impact of demonetisation . This is the slowest pace of economic growth since the January-March quarter in 2014.GDP slowed to 5.7 per cent in the April-June period from 6.1 per cent in the preceding quarter. The core sector, however, held out hope of a recovery, growing 2.4 per cent in July compared with 0.8 per cent in June as natural gas, steel, electricity and coal production increased in the month. GDP and core sector data were released separately on Thursday evening.“The major sector which has seen a sharp decline is industry,” chief statistician TCA Anant said with regard to the growth slowdown. Finance minister Arun Jaitley expressed concern about the numbers but said the economy was well placed for revival with GST in place.“Domestic public investment is going to be high as the revenue trend is positive,” he said. “With GST now implemented, the curve could turn for better.” He pointed to manufacturing’s role in the slowdown. “Data throws up challenges for the economy,” he said.“We need to work more on policy and investment in the coming quarters... Agriculture GDP is in the normal range of 2 per cent . Investment services have improved but it is manufacturing that has bottomed out. Manufacturing slump (is) due to the transition to the GST regime.” Data released by the Central Statistics Office on Thursday showed total gross value added (GVA) in the first quarter of FY18 at 5.6 per cent against 7.6 per cent in the year earlier. Anant attributed the decline in GVA to the high prices of intermediate goods and reduced inventory.Economists had expected GDP growth at 6.5 per cent . Most are now looking at revising estimates for the year.IDFC Bank has revised its forecast downwards for full-year GDP growth to 6.6 per cent from the earlier projection of 7.2 per cent.“This is on account of investment continuing to remain weak and net exports expected to stay negative. Also, government will have to crunch its expenditure in some time,” said Indranil Pan, chief economist at IDFC Bank.Ratings agency ICRA said the likelihood of growth surpassing 7.0 per cent in the current fiscal year has diminished after the Q1 reading. India Ratings said its forecast of 7.4 per cent GDP in FY18 will get revised downwards.“Q2 FY18 growth may also remain muted. Overall, it remains to be seen whether the GDP growth for the current fiscal stays below 6.5 per cent ,” said Soumya Kanti Ghosh, group chief economic advisor, State Bank of India.Manufacturing growth (GVA) in the first quarter of the current financial year plummeted to 1.2 per cent from 10.7 per cent in the year ago. However, gross fixed capital formation (GFCF), a proxy for investment, rose 1.6 per cent on year, pointing toward a mild improvement in India’s investment rate.“The turnaround in GFCF, to growth of 1.6 per cent in Q1 2017-18 from the 2.1 per cent contraction in the previous quarter, offers a modicum of encouragement, even as private sector investment activity remains muted,” said ICRA principal economist Aditi Nayar.Anant expressed confidence that manufacturing will see a rebound in the second quarter and said the GDP slowdown was an effect of normalisation of the wholesale price index (WPI) and not because of demonetisation affecting demand. With regard to the future trajectory of WPI, Anant said there might not be a further increase in the number, given the greater degree of convergence between it and the consumer price index (CPI) at 3-4 per cent levels.However, he said it will be wrong to link the entire decline in economic activities to demonetisation, as GVA was declining from the second quarter of the last fiscal, much before the November 8 decision of the government to wipe out high-value currency notes.The eight core sectors grew 2.4 per cent in July compared with 0.8 per cent in June led by a favourable base effect for steel, cement, fertilisers and electricity. Electricity generation accelerated to 5.4 per cent in July from 2.2 per cent in June, reflecting a favourable base effect, as well as some improvement in industrial demand after GST took effect.Natural gas output rose 6.6 per cent in July while steel production and power generation rose 9.2 per cent and 5.4 per cent , respectively. The production of crude oil declined 0.5 per cent , refinery products 2.7 per cent , fertiliser 0.3 per cent and cement 2 per cent , showing mixed trends for industrial production in July.QI GDP growth estimates lack lustre, but it is quite likely that the economy will pick up speed during the year. The sharp drop in the growth figure to 5.7 per cent , down from 7.9 per cent in the like period last fiscal, seems almost entirely due to significant slowdown in the manufacturing sector. The growth in Gross Value Added (GVA) in manufactures has dropped precipitously to a mere 1.2 per cent during April-June, down from 10.7 per cent GVA growth in the same period last year. But the sharp deceleration maybe in the run up to GST and stock clearance, in changing over to the new indirect tax regime. Consumption expenditure remains buoyant.