Analysis of National income for Q2 2017-18 After 5 quarter of declining universal trend in GDP, we see a reversal in trend in the Q2 2017- 18. As compared to previous year (2016-17) Q2 GDP at constant price of 7.5%, 2017-18 Q2 figure is less at 6.3% but is still better compared to this year’s Q1 GDP growth percentage that is at 5.
7%. Since the end of 4th quarter (Q4) of 2015-16, GDP has been subsequently declining and the Q2 2017-18 marks as a reversal in trends. Behind this reversal in trends or growth are certain sectors (Manufacturing, Electricity Gas water supply & other utility services, Trade Hotel Transport Communication & Services related to broadcasting) which performed well in this quarter. And certain sectors which have underperformed include Agriculture, Forestry and Fisheries, Construction and Real estate.
Implication of GST in GDP calculation: In computation of GDP, GVA is calculated sector wise by including various key indicators contributing to it. Then there is addition of net indirect taxes, wherein we subtract the subsidies to convert GVA in to GDP at market price. Indirect Taxes ? Now with the introduction of GST, Indirect taxes being changed in to large part of CGST and SGST, so this introduced a statistical challenge for computation of the GDP. ? With the implementation of GST, there is a measure of uncertainty being faced by number of businesses for computing their tax liability, due to which the tax payment due in the period where not paid in time. So government has provided considerable measure latitude to businesses to file late and the tax data for the relevant period is updated even today for the filings to be stated as complete. ? The data was taken as it came to the point of compilation/collection reported until the relevant period of Q2, and has been used as basis to compute indirect taxes. Consequence of the above methods utilized for the computation of GDP calculation could be that when revised estimates are released considering all the late tax payments filed during the relevant period, it will result in higher indirect tax collection than calculated currently for the Q2 2017-18.
Sales Tax Sales tax being subsumed in to GST led to problems in determining the trade volume via sales tax collection or it was problem for projecting estimated retail trade for the relevant period using sales tax. Following methods were employed for the same: ? Products outside GST like petroleum, alcohol etc. were looked at, to determine/check the relationship between Non-GST goods & overall sales tax, and the relationship was found to be considerable stable. So one way to project retail trade was to estimate the overall sales tax collected on Non-GST commodities.
3 | P a g e ? Second possibility to estimate trade volume involved relating overall sales tax collection to the production of commodity producing sectors which are subjected to tax. Wherein relationship was estimated between overall sales tax and commodity producing sectors production from 2011-12 onwards using regression analysis. Hence the projection of sales tax collection was estimated on that basis. ? Third method involved using simple projection/nominal growth in the output of commodity producing sectors, leading to sales tax collected for the period. The above mentioned three methods then were utilized to compute 3 figures, and then it was recommended by Advisory Committee on National Accounts Statistics (ACNAS) to take averages of the estimated figures obtained from 3 different approaches. Trend Reversal of GDP GDP for Q2 at 6.3% growth rate as compared to Q1 growth rate being 5.7% could be termed as a trend reversal from declining 5 quarters of GDP.
? But this figure of Q2 being better than Q1 can be also connected to implementation of GST in the month of July, which led to less production and more of clearing of stocks/inventories from business during the period of Q1 as Businesses had a certain measure of uncertainty regarding production before GST implementation. ? Q2 quarter comprising of the months July, august and September led to the settlement of GST, also upcoming months from mid-September mark the festive season of India, which leads to increase in production from businesses and manufactures. So due to clearance in inventories before Q2 and also upcoming festive season led to better production amounts/units in the period. Production in this quarter was mainly for consumption/sale. ? Also with the clearance of inventories, manufacturers and businesses have started restocking/restoring/revamping their inventories which also one of the key indicators in increase of growth percentage of GDP for Q2. Also the effects of restocking would be seen as growth percentage in upcoming quarter results. Manufacturing ? Growth in manufacturing sector has come down as compared to previous year but for the sector, growth rate is better as compared to Q1 growth rate. ? Also 7.7% is not as high rate as have been seen in past, but it is coming after 2 quarters of decline, last quarter Q4 2016-17 being 1.2% and previous quarter Q1 2017-18 being 5.3%, Manufacturing sector has shown revival ? Uncertainty related to GST has worn out to certain extent and companies have started production and supplying Agriculture ? The GVA for this quarter is 1.7% for agriculture sector as compared to 4.1% for the previous year Q2 4 | P a g e ? The reason for the decrease in growth rate being the production of food grain during kharif season during 2017-18 declined by approximately 2.8% ? Also the non-crop production segment in this sector has held up the GDP, whereas crop production segment has performed relatively poor Trade, hotels and Transport & communication and services related to broadcasting ? Quarterly GVA at basic prices for Q2 of 2017-18 from this sector grew by 9.9 percent as compared to growth of 7.7 percent in Q2 of 2016-17 Construction ? Quarterly GVA at basic prices for Q2 of 2017-18 from Construction sector grew by 2.6 percent as compared to growth of 4.3 percent in Q2 of 2016-17 ? Key indicators of construction sector, namely, production of cement and consumption of finished steel had low growth percentages compared to previous year Q2 Electricity, Gas, water supply and other utility services ? Quarterly GVA at basic prices for Q2 of 2017-18 from Electricity, Gas, water supply and other utility services sector grew by 7.6 percent as compared to growth of 5.1 percent in Q2 of 2016-17 Mining and quarrying ? Quarterly GVA at basic prices for Q2 of 2017-18 from mining and quarrying sector grew by 5.5 percent as compared to decline of 1.3 percent in Q2 of 2016-17 ? The key indicators of mining sector, namely, production of coal, crude oil and IIP mining registered growth rates of 8.6 per cent, -0.7 percent and 7.2 percent respectively during Q2 of 2017-18