India forecasts slower growth

A bank clerk counting old Indian rupee notes at a bank in Kashmir, India. Economists have pared India's growth forecast to 6.3 per cent to 6.4 per cent for the 2016/17 fiscal year, citing the impact of the demonetisation.
A bank clerk counting old Indian rupee notes at a bank in Kashmir, India. Economists have pared India's growth forecast to 6.3 per cent to 6.4 per cent for the 2016/17 fiscal year, citing the impact of the demonetisation. PHOTO: EPA

NEW DELHI • India yesterday predicted robust economic growth in the fiscal year that ends in March, but the forecast does not fully account for the disruption caused by Prime Minister Narendra Modi's decision to abolish high-value old currency bills.

Gross domestic product (GDP) is estimated to achieve annual growth of 7.1 per cent in the fiscal year 2016/17, slower than a provisional figure of 7.6 per cent a year earlier.

Most private economists have pared India's growth forecast to 6.3 per cent to 6.4 per cent for the 2016/17 fiscal year, citing the impact of the demonetisation, which they reckon would linger for one more year.

Yesterday's GDP estimate is a vital input for Finance Minister Arun Jaitley's Budget on Feb 1. But the federal statistics office said the projection was mostly based on data available until the end of October last year.

Mr Modi's Nov 8 decision to scrap 500-rupee and 1,000-rupee banknotes as part of a crackdown on tax dodgers and counterfeiters has left companies, farmers and households in pain.

"I am very worried about the projected growth rate," said Mr Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance. "Taking demonetisation into account, the rate will drop substantially," he said, adding that full-year growth would be much lower than 6.8 per cent.

Until last year, the government's statisticians would wait for GDP data for the quarter to December before putting out full-year estimates.

This year, December quarter figures will not be available before the end of next month, making the projection largely reliant on the economy's performance in the period before demonetisation, when consumer demand was strong.

The statistics office will release the data on Feb 28, along with revised full-year growth estimates.

REUTERS

A version of this article appeared in the print edition of The Straits Times on January 07, 2017, with the headline 'India forecasts slower growth'. Print Edition | Subscribe