Govt says Oct-Dec GDP grew 7% despite note ban

NEWDELHI: Belying grim forecasts inspired by the impact of demonetization, India’s economy grew at a healthy 7% in the fiscal third quarter.

Analysts polled by Reuters had expected a 6.4% growth rate in the quarter to December. The pace of growth did, however, slow from the 7.4% logged in the second quarter of the fiscal year.

The Central Statistics Office (CSO) retained its projection that the economy will grow 7.1% in 2016-17, slowing from 7.6% in the previous financial year.

More importantly, the 7.1% GDP growth rate was retained over a higher base in 2015-16. On 1 February, CSO revised the 2015-16 GDP growth number to 7.9% from 7.6% estimated earlier. The first advance estimate of GDP growth was released a month before it was due to help the government prepare the budget, whose presentation was advanced by a month to 1 February. Except construction (2.7%), and financial and real estate (3.1%) sectors, all other sectors grew at a faster pace in the third quarter compared with the preceding quarter.

The first and second quarter GDP growth estimates were also revised upward by 10 basis points to 7.2% and 7.4% respectively. One basis point is onehundredth of a percentage point.

Prime Minister Narendra Modi on 8 November invalidated Rs500 and Rs1,000 currency notes, which made up 86% of the currency in circulation by value, as part of his government’s fight against black money.

The currency crunch that followed the demonetization of high-value notes was widely believed to have impacted consumption, driving down economic growth.

The CSO data showed that private final consumption picked up in the third quarter to grow 10.1% against 5.1% in the second quarter.

The numbers negate the negative projections which were made about the impact of demonetisation SHAKTIKANTA DAS , economic affairs secretary