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India April-June GDP growth underwhelming
August 31, 2015, 3:55 pm

The Narendra Modi-led government is struggling to get India’s parliament to vote on unifying the nation’s 29 states under a single sales tax, pegged as a landmark reform [Xinhua]

The Narendra Modi-led government is struggling to get India’s parliament to vote on unifying the nation’s 29 states under a single sales tax, pegged as a landmark reform [Xinhua]

Amid a slowdown in manufacturing, services and farm sectors, India’s GDP growth slowed to 7 per cent in the April-June quarter, from 7.5 per cent in the previous quarter, official figures released on Monday revealed.

The official target has been set at 8 to 8.5 per cent for the year to March.

India’s infrastructure output, which accounts for nearly 38 per cent of industrial production, grew just 1.1 per cent year-on-year in July, its slowest pace three months.

India’s services sector in the last quarter grew an annual 8.3 per cent compared with a 10.2 per cent rise in the March quarter.

The Central Bank of India, which has cut interest rate by 0.75 per cent in three tranches since January, is scheduled to announce the next bi-monthly policy on September 29.

Farm and allied sectors grew at 1.9 per cent in the April-June quarter, down from 2.6 per cent in the previous year, said figures from the Central Statistics Office on Monday.

The output of mining and quarrying sector too slipped marginally to 4 per cent, from 4.3 per cent a year ago. Financial, real estate and professional services growth shrank to 8.9 per cent as against 9.3 per cent a year earlier.

Meanwhile, the Narendra Modi-led government is struggling to get India’s parliament to vote on unifying the nation’s 29 states under a single sales tax, which is being touted as one of India’s biggest economic reforms in decades.

However, experts have warned a high rate for the new goods-and-services tax (GST) — offering more revenue to distribute back to states — would limit the gains to businesses and consumers.

“The proposed GST framework has many flaws; it may exclude major items like alcohol, tobacco and petroleum products from its purview and the revenue neutral rate or the combined incidence of the state-level and central GST may be fixed at an unreasonably high level at 27 per cent. The goal of widening the tax base may also remain unrealised if so many items are kept outside the purview of the GST. It will be important to bring more goods under the GST regime so that the overall revenue neutral rate can come down to a more reasonable rate of 18 per cent, the level recommended by expert committees in the past,” argues an editorial in Indian daily Business Standard.

 

 

TBP and Agencies