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Indian economic growth slows in December quarter of 2016

Indian economic growth slows in December quarter of 2016

India's Gross Domestic Product (GDP) developed at a rate of 7% in the October-December quarter of the fiscal year 2016-17 subsequent to calculating the note ban impact.

The unrevised GDP growth in the fourth quarter is notably slower than the 3.5 percent jump seen in the third quarter.

The government also revised the growth rate for the second quarter to 7.4 per cent from the earlier 7.3 per cent.

It was feared that demonetisation affected in the middle of the third quarter (November 9, 2016) would have adverse bearing on various segments of the economy.

Soon after Prime Minister Narendra Modi's historic announcement to scrap old Rs 500 and Rs 1,000 notes to curb the menace of black money, graft and terror funding, analysts including at the Finance Ministry and Reserve Bank of India have lowered the GDP projection for 2016-17. Anticipated growth of real GVA at basic prices in 2016-17 is 6.7 per cent against 7.8 per cent in 2015-16. Since all the growth estimates have moved south, any good news from the CSO would come as a surprise.

The Organisation for Economic Cooperation and Development (OECD) had in February a year ago projected the country's economy to expand at 7.4 per cent in 2016-17.

It was a positive surprise for most economists as everyone was pegging the growth at 6-6.5%, taking into account the slowdown in consumption in the country.

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With demonetization denting consumer demand, overall vehicle sales in the month of December also fell for the first time in 11 months, dropping 1.36% from a year ago to 227,824 units.

Overall, in gross value added (GVA) terms, growth declined to a six-quarter low of 6.6 per cent during the third quarter of this fiscal, from 6.7 per cent during the preceding quarter and 7.0 per cent during the corresponding quarter a year ago.

Chief statistician T.C.A Anant said that it was hard to assess the full impact of demonetization.

During the quarter, small firms with sales of less than 1 billion rupees ($14.9 million) "faced the heat of the demonetization drive" as a large proportion of their transactions are conducted in cash and operations were impacted quite markedly, the Indian credit rating agency said.

Estimates for growth this year range between 2 percent and 3 percent.

The current expansion has endured for more than seven years, longer than the historical average, but its rate of growth has been the weakest since at least 1949.

This estimate is based on a more complete set of data than was available in the advanced estimate last month, but held steady at 1.9%.

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