India Inc expresses disappointment over weak GDP data

New Delhi: India Inc on Thursday expressed disappointment over the country's economic growth, which slipped to a three-year low of 5.7 percent in April-June.

Industry chamber PHDCCI said ease of doing business remains a major concern as manufacturing firms, particularly labour intensive units, are impacted by various stringent laws and compliance costs.

"Going ahead, the breakthrough in GST should also be followed by reforms in labour laws such as a single uniform labour law across the country," PHDCCI President Gopal Jiwarajka said in a statement.

Growth of India's real GDP at 5.7 percent in the first quarter is "disappointing" as the industry was in anticipation of rebound from low growth in the last quarter of 2016-17, he added.

He also stressed that there is a need to focus on reforms to improve the ease of doing business scenario, particularly for MSMEs, in order to encourage setting up of more industries.

Assocham suggested that policymakers should take urgent steps to revive private investments.

The chamber cautioned the government that further downward risks to the growth still prevail in the form of rising crude oil prices due to the Gulf crisis and inventory drawdown in the US that will have its adverse effects on current account deficit and exchange rate.

"Continuous fall in fixed investments, unsolved problem of bank's NPAs, global policy and political risks, tightening financial conditions on account of deleveraging financial institutions and slowdown in real estate could weigh negatively," it added.

India's GDP growth dropped to a three-year low of 5.7 percent during April-June as manufacturing slowed ahead of the launch of GST and the impact of demonetisation lingered on.

Crisil's D K Joshi too said the GDP number is "disappointing" as the expectation was that the growth would be 6.5 percent.

Former chief statistician Pronab Sen said it was expected that the first quarter GDP would be weak because of GST.

Industry chamber Ficci said the growth numbers indicate a moderation in agriculture and industrial sectors.

"The uncertainty surrounding implementation of GST did impact industrial production in the first quarter. However, we are confident that this effect will wane off in coming months," it said, adding a pickup in economic activity can be expected in the second half of this fiscal.

It also said the persistent slack in private domestic investments remains a concern.

The chamber also asked the central bank for a steeper rate cut at this juncture.

"A turnaround in domestic private investments is critical to push growth and employment generation in the economy," it added.

Icra said that the likelihood of economic growth surpassing 7 percent for the ongoing fiscal has diminished after the bleak Q1 data.