‘Negative Effects of Note Ban on Economy Fading’
Fiscal deficit target of 3.2% for FY18 ‘reasonably ambitious’: S&P
New Delhi: The negative impact of demonetisation on economic activity has begun to reverse in India, international rating agency S&P Global Ratings has said. In its APAC Economic Snapshots, S&P also said that fiscal deficit target of 3.2% for the next financial year announced in Budget is “reasonably ambitious”.
“The negative effects of India’s demonetisation on economic activity have begun to reverse. However, it is still far from returning to pre-November 2016 trends,” it said. The US-based agency had in December said note ban will have a “higher disruptive impact” on informal, rural, and cash-based segments of the economy. S&P has recently revised downwards its estimated economic growth rate for 2016-17 by one full percen- tage point to 6.9% to reflect the disruption caused by the surprise move of demonetisation. With regard to macroeconomic indicators, S&P Global Ratings said inflation eased further in January, driven mainly by food and fuel, and the Reserve Bank of India kept its benchmark repo rate on hold at 6.25%. “The Indian government announced a reasonably ambitious fiscal deficit target of 3.2% of GDP in the fiscal year ending March 2018, keeping the headline indicator on an improving trend,” it said.
In Budget, the government announced lowering fiscal deficit to 3.2% in 2017-18 from 3.5% in current fiscal.