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India’s GVA is likely to grow at 6.6 per cent in 2016-17: ICRA

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The domestic rating agency ICRA has forecasted India’s gross value added (GVA) growth to be at 6.6 per cent in 2016-17. This is because the economic activity would take more time to normalise due to the government’s move to demonetise high-value notes.

Important Points of the ICRA Report

The report said that the currency liquidity is likely to improve significantly by the end of January 2017, however, the economic activity may take longer to normalize.

  • It stated that the rate of revival of economic activity in the fourth quarter of the current financial year would depend on how quickly currency in circulation gets replenished and digital transactions become more widespread.ICRA
  • The report also said that if this pace of release of cash is maintained and the proportion of fresh notes in different denominations remains the same, currency liquidity is likely to improve considerably by the end of January 2017, prior to the presentation of the budget for 2017-18 and the next monetary policy review
  • According to the report, the loss of income in some sectors and deferral of consumption is likely to weigh on capacity utilisation in the second half of 2016-17, delaying capacity expansion plans of the private sector.
  • It predicted that the implementation of the Goods and Services Tax (GST)  before September 16, 2017, would dominate the economic landscape.
  • The final tax rates for different categories of goods and services will affect price movement after shift to GST, which may result in either delays or upfront purchases during the transition.
  • The process of providing input tax credit, both on central levies and across state borders, is expected to be more efficient in the new regime, it predicted.
  • The reduction in the prevailing condition is likely to improve competitiveness of the organised sector.

Gross value added (GVA)

GVA is the measure of the value of goods and services produced in an area, industry or sector of an economy, in economics. In national accounts GVA is output minus intermediate consumption.

  • In other words, GVA is the grand total of all revenues, from final sales and (net) subsidies, which are incomes into businesses. Those incomes are then used to cover expenses (wages & salaries, dividends), savings (profits, depreciation), and (indirect) taxes.
  • GVA = GDP + subsidies – (direct, sales) taxes
  • GVA + taxes on products – subsidies on products = GDP

About ICRA Limited

ICRA is an Indian independent and professional investment information and credit rating agency. It was established as an Investment Information and Credit Rating Agency of India Limited (IICRA India). It is one of the largest Indian rating company in term of customer base.

  • It was a joint-venture between Moody’s and various Indian commercial banks and financial services companies. The company changed its name to ICRA Limited, and went public on 13 April 2007, with a listing on the Bombay Stock Exchange and the National Stock Exchange.
  • Headquarters: India
  • CEO: Naresh Takkar
  • Founded1991