Money deposited in bank does not make it legitimate: Arun Jaitley

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India's GDP growth decelerated to a 5.7% year-over-year rate in the April to June quarter from 6.1% in the preceding quarter, according to the Government's Ministry of Statistics and Programme Implementation.

In terms of Gross Value Added (GVA), which excludes indirect taxes and subsidies, the growth was even lower at 5.6 per cent over the GVA for the corresponding quarter of a year ago. The economy had expanded at 6.1 per cent in the March quarter and at 7.9 per cent in the April-June quarter of the previous year.

The GDP was 7.90 per cent in the same quarter past year.

An exports slowdown dented GDP growth by 2.6 percentage points in the last quarter.

In contrast, the Indian economy had expanded 7.9 percent expansion in the same quarter past year.

Uncertainty about new indirect tax rates under GST prompted a host of industries, including carmakers, FMCG companies and garment manufacturers, to clear their stocks. "The slowdown reflects sharp deceleration in exports of goods, and some moderation in consumption growth", it said.

"Slowdown of the economy was witnessed after the second quarter a year ago itself".

India aims to trim the fiscal deficit to 3.2 percent of gross domestic product in 2017-18 compared with 3.5 percent in the previous year.

Union Finance Minister Arun Jaitley today expressed concern over the drop in GDP growth and said it poses a challenge for the economy.

Though it is unlikely that the effect of demonetisation and the GST will be felt in the next quarter's GDP growth, especially because of a normal monsoon in the Kharif season, but you never know, when the Indian PM decides to come up with another "historic" idea and leaves the whole country surprised and shocked. Cash-intensive sectors, including construction and real estate, that bore the brunt of demonetisation impact appear to be recovering smartly.

Icra's Aditi Nayar noted that the pace of growth of industry and agriculture was lower than anticipated whereas the service sector's growth exceeded the rating agency's forecast.

Another important matrix - gross fixed capital formation (GFCF) - that reveals corporate investment, also showed a dip.

Using the new bankruptcy law, the central bank has prodded banks to initiate insolvency proceedings against 12 large corporate defaulter to resolve Rs 2 lakh crore or nearly a fourth of the country's bad debt.

When Prime Minister Narendra Modi made the shock announcement on November 8 that 500 and 1000 rupee notes (about 7 and 15 dollars) would no longer be legal tender it was estimated that the cash in circulation in the high value notes was worth 15.4 trillion rupees. But before that happens, policy actions and investment are both needed to ensure that economic growth picks up, he said.

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