After GDP figures were released earlier this week, Dr. Soumya Kanti Ghosh, Chief Economic Adviser, Economic Research Department, State Bank of India (SBI) has expressed her views on the aforementioned figures.
In her report titled 'Deciphering the GDP Numbers,' Ghosh highlighted a number of areas which have shown improvement in the past year, the most significant one being the manufacturing sector, which posted an increase of 8.3 percent year-on-year.
"Cash intensive sectors, as is widely perceived amongst analyst fraternity, may not find the results surprising. Sectors such as Diamonds, Gems and Jewellery, Mining, Realty, Construction, Refineries etc. were no surprise. It only reiterates the belief that such sectors may not only strengthen the formal economy but galvanise economic activity to consolidate the operations in such sectors," the report read.
According to Ghosh, demonetisation was a crucial opportunity to consolidate mainstream operations into formal sector. "The way forward, as is now expected, is that these sectors continue on this path and not disappoint its stakeholders post demonetisation," added Ghosh.
The report also talks about the growing wedge between GVA and GDP, due to higher collection of indirect taxes. "In Q3 FY17, the gap between GDP and GVA was 35 bps compared to the gap of merely (-)2 bps during Q3 FY16. In FY17, all the three quarters exhibited large gap (even upto 70 bps) between GDP and GVA compared to the corresponding quarter's last fiscal. This is primarily due to huge increase in indirect tax collections during FY17. Going forward as this component of taxes is going to increase the gap between GDP and GVA will also increase. Hence it is better to see GVA instead of GDP," the report suggests.
Disclaimer: No Business Standard Journalist was involved in creation of this content
