‘Neg­a­tive Ef­fects of Note Ban on Econ­omy Fad­ing’

Fis­cal deficit tar­get of 3.2% for FY18 ‘rea­son­ably am­bi­tious’: S&P

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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.

ET AR­CHIVE

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