GDP calculation is mysterious in Q1 FY2017-18, reality GDP is only 3.4%

Look at this table given by Govt, for releasing the Q1 2017-18. Link here.
http://www.mospi.gov.in/sites/default/files/press_release/PRESS_NOTE-Q1_2017-18_31aug17.pdf

The amount in the row titled "Valuables" jumped from Rs 34687 Crores in Q1 of 2016-17  to Rs 105716 Crores, a whopping 205% increase. Valuables is Jewels and Art works added in the nation at Constant price as per RBI definition. Link here: https://www.rbi.org.in/scripts/PublicationsView.aspx?id=13552

The Govt has not explained this anomaly. Let's do an average of Q1/2014-15 and Q1/2015-16 and let's use that number to find the Total GDP.
Average Valuables for 2017-18 = [Rs 40244 + Rs 34687 ]/2 ===> Rs 37400(~)

After replacing this new Average in the above table, let's do GDP total: ==> Rs 3041829 Crores.

Now, how much is growth?   { [ Rs 3041829(Q1-2017/18)   - Rs  2941846(Q1-2016/17) ] / Rs  2941846 * 100 }
                                       
                                           ===> 3.4%

So, if we remove the anomaly of Jewels/Diamonds/PreciousStones/Arts under the Valuables Row, the growth for Q1-2017-18  is only at 3.4%.

Or the Govt need to explain how the Valuables jumped 200% in Q1 2017-18. 

Why India's GDP growth of Q2 FY2018 would be around 5% or lower?

During the past few weeks, there is huge conversations on India's GDP growth and the possibilities of even lower growth this year 2017-18. This was culminated from the govt's release of GDP growth rate for Q1-FY2017-18 at 5.7%. This is one of the lowest growth rate during the past 3 years.

In this background, it becomes important to revisit the growth projections posted by various rating agencies, researchers etc. The SBI research, ADB, Subramanian Swamy and Morgan Stanley have lowered their GDP projections from their earlier high projections for current year 2017-18.

I believe the following are some of the reasons that the Govt overlooked in providing projections at 7.5% for the current year. Now, given the release of GDP growth Q1FY2018   at 5.7%, it is impossible to achieve the Govt's projection of 7.5% growth for current year.

The factors which would impact the GDP growth of current year.

1. GDP Calculation Method switch in 2015.
The Govt of India, switched the GDP calculation method of factor-cost basis to market cost expenditure basis in Febuary 2015. The factor-cost GDP calculation was introduced by Nehru's govt,  during early years of  India's industrialization. That was based on mix of Fabian Socialism and Soviet's Marxim's   economic theories.  However, the nations all over the world have moved to more modern methods of GDP calculation.   Even the USA had moved from GNP to GDP in year 1991.

India could not  affort to continue to use the orthodoxy GDP calculation methods. Mr. Modi's govt opted to the new method starting from 2015. However, the problem is to calculate growth of every quarter after Q1 2015 for first 4 quarters starting from Q1 2015, India did not have market cost expenditure numbers measured in that method in previous 4 quarters. So, between Q1 2015 and Q1 2016, whatever method India used was not completely reliable. The high growth of  year 2015 and 2016 could be attributed to this malaise and confusion. But, now the data is available for year 2016 measured exactly in market cost expenditure basis. Comparing current year 2017's quarterly GDP growth, no longer has last year's advantage.

2. "Inflation Margin Crop" - missing
What is Inflation Margin Crop? Well, it's well known fact that India's Inflation measurement is not      accurate during the past 20 years. Although India has made profound improvement over the years to calculating Inflation more accurately. How does it impact GDP calculation?  India now uses market cost expenditures since 2015. During the past 6 months, the Inflation is the lowest in years in India. During the high inflation times, the adjustment that was made to arrive at Constant price GDP numbers had added benefit. Because the real market inflation has been higher than Govt's published inflation. The gap between real inflation and published inflation worked out to inflate the GDP numbers published at constant price basis. This is the "Inflation Margin Crop". Since the Inflation is so low past 6 months, the Inflation Margin Crop got reduced significantly. That is bound to show lower GDP growth at least for this current year, due to continuing low inflation.

GST: Stabilization or Sterilization?

The GST baby is out of incubator in India. It appears from various reports that the GST rollout is mostly successful in it's implementation, except few technology glitches.

Now, is the time to measure the results against the goals? Or is it heading in the right direction towards the goal of "Achie din"? Or is it helping to balance fiscal position of India?

To answer all these questions, one needs to look at one year of GST performances and GST indicators.

Arun Jaitely climed the Revenue of Rs 95,000 Crores for the first month GST in place, for July 2017. However, as usual, the minister failed to say the Media that there is this Input Tax Credit, which is allowed as part of GST regime, filed by the traders are at Rs 62,000 Crores. Although the Govt questions the genuineness and validity of the huge ITC filing, it must provide the ITC for GST to succeed in the forthcoming months and keep the Credibility of Govt.

If the Govt refuses to recognize the ITC of July, the risk that traders will look to do business outside GST, and that again threat to the macro economy.

What is GST sterilization? Well, Govt attempts to bring as much informal economy into formal economy.  Implementation of GST is the first sterilization step towards this. The Sterilization is success. Will the stabilization of GST becomes success or not, would not be known until a year later!