Economy could miss 7.1% growth estimate in 2016-17; Oct-Dec numbers critical
Even as the Central Statistics Office (CSO) on Friday projected India’s GDP growth at 7.1% for 2016-17, government sources said the relevant economic data for December would be the deciding factor for computing the number for the full year.
An official source told HT on the condition of anonymity that the number could even be lower than 7%.
The full impact of demonetisation has not been taken into account while computing the advance growth estimates, sources said.
“At this point it is difficult to say... we are awaiting the December data, which we will get in another week... a clearer picture will emerge only after that... the demonetisation exercise is the first of its kind, and it is yet to be seen what the actual impact will be,” said the official source quoted above.
The advance estimates are based on all relevant data till October and a few from November. “The December data will be critical and this has not been factored in,” the source added.
With the Reserve Bank of India pegging India’s economic growth at 7.1% for the current fiscal, “the CSO was left with no choice but to peg the rate closer to this number,” according to a recent SBI report. “Interestingly, if we look at the historical evidence, the gap between RBI and CSO estimates in the past has been around 20 basis points (bps).”
Most think tanks have lowered their growth projections for the current fiscal. Many have indicated that the demonetisation exercise could shave off 100 basis points from the GDP growth figure.
Prime Minister Narendra Modi on November 8 announced the withdrawal of all high-value currency notes of ₹500 and ₹1,000, thereby sucking out 86% of the currency in circulation.
However, finance minister Arun Jaitley has said the demonetisation exercise will prove to be beneficial in the long run, and that India’s macroeconomic indicators continued to remain strong.