<!– /11440465/Dna_Article_Middle_300x250_BTF –>India’s economy grew by 5.7% in terms of Gross Domestic Product (GDP) during the first quarter of the current financial year (April-June) while the new growth parameter, Gross Value Added (GVA) came at 5.6%, highlighting the adverse impacts of several factors, with disruptions associated with introduction of Goods and Services Tax (GST) being the most direct and immediate cause.The fall in economic growth comes at a time when expectations were riding high of India overtaking China’s growth. China reported a quarterly growth of 6.9% for April-June period, overshooting its own estimates.As per the data released on Thursday by the Central Statistics Office, India’s economy grew at a slowest pace in over 13 quarters, raising questions about the Reserve Bank of India’s prediction of 2017-18 GVA growing by 7.3% topping previous year’s 6.6%, as per the annual report released by the banking sector regulator just a day before.The first GDP quarter growth figures contrast sharply against the 7.9% growth in the corresponding quarter in 2016 and 6.1% growth reported in January-March.What factors contributed to these not-so-enviable growth figures? Extreme destocking, disruption in production schedules and discounts offered ahead of the implementation of the GST could be the major reasons, apart from Wholesale Price Index deflator, says chief statistician TCA Anant.”A major sector that has seen a sharp decline is industry. Corporate entities were pulling down their stocks in April-June, which seems to be in anticipation of GST,” Anant said.Finance Minister Arun Jaitley said manufacturing sector growth has gone down due to GST’s impact on destocking, and with GST woes now behind us, the curve could turn for better. As the global economy is improving faster than anticipated, domestic public investment is going to be high. But before that happens, policy actions and investment are both needed to ensure that economic growth picks up, he said.Anant stuck to his theory of WPI deflator pulling down industrial growth figures.Economists also point an accusing finger at the government’s demonetisation drive. “The lingering impact of demonetisation, as well as the effect of the real estate regulatory authority (RERA) are visible in the low 2% growth of construction in the first quarter. The combination of lower volumes and higher discounts offered to reduce inventories ahead of GST, and the turnaround in average WPI inflation weighed upon the manufacturing GVA growth in April-June, 2017,” said Aditi Nayar, principal economist, ICRA Ltd.”Crucially, the government has also revised down GVA growth for the fourth quarter of last fiscal by 50 basis points to 5.6%, suggesting that the impact of demonetization on the economy was more than earlier estimated,” said Crisil Research in a report.Doubling of value-based items in the new Index of Industrial Production (IIP) series might have inflated manufacturing growth in the previous year when wholesale price inflation was negative compared with the current situation when WPI is positive.”Trends of IIP are now increasingly affected by movements in WPI. The new series is likely to show inflated growth during times of falling inflation. Therefore, the sharp rise in the growth of IIP need not be on account of actual rise in production volume in industries,” says a research report by Radhika Pandey of National Institute of Public Finance and Policy.Manufacturing fell sharply in the quarter from 10.7% to 1.2% with the predominant pressure coming from the private sector SME segment. Agriculture, growing at 2.3% could match up to 2.5% seen in the corresponding quarter last year.Whatever be the reasons for slow growth, the figures were way off the mark from most of the estimates. HDFC, for example, was expecting a GVA of around 6.7% on the assumption that consumption spending, government services coupled with buoyancy in agricultural sector would have helped the country post a modest growth in economic activities.Rating agency ICRA, however was more conservative, predicting a figure of 6.3% on the back of headwinds like GST disruptions, impact of rupee appreciation on export earnings and troubles in banking and telecom.The figures, coming after India’s moral victory at Doklam standoff, could be some embarrassment for the Indian government as India’s GDP growth has now slipped below that of China.