Mauled by note ban, economy to grow 6.8% in FY17: Ficci

NEW DELHI: The Indian economy will grow 6.8 per cent this fiscal due to a slowdown in services and infrastructure post demonetisation, according to Ficci’s Economic Outlook Survey. The annual median GDP growth forecast of 6.8 per cent is sharply lower than the 7.3 per cent projected in the previous round of the survey. The survey was conducted in the months of December 2016/ January 2017 and drew responses from leading economists representing industry, banking and financial services sector. The Central Statistical Organisation had estimated a GDP growth of 7.1 per cent for 2016-17 earlier in January.

According to the Ficci survey, the agriculture sector is expected to witness an uptick in 2016-17 on the back of a good monsoon which is expected to support agricultural production. However, both industry and services sectors are anticipated to moderate. Industry and services sector are expected to grow by 5.7 per cent and 8.5 per cent, respectively in 2016-17.

“The decision of the government to demonetise high value currency notes has had an impact on the cash dependent sectors primarily belonging to the informal economy. This is expected to cause some slowdown in industrial and services sector growth,” the survey observed in its findings.

The economists had a divided view on the timeframe by which the economy would return to normalcy. Although some believed that things will start rolling back to the way they were in the predemonetisation days by the end of the current quarter (March 2017), others felt that it could take at least two more quarters for things to fully settle (June 2017).

Economists pointed out that India’s economic growth was being propelled by government spending and private consumption and the latter has been hit due to the demonetisation move. This will affect recovery in investments and overall growth.

The participating economists opined that demonetisation exercise would lead to a healthy correction in many sectors of the economy, especially in the real estate segment. A majority of the respondents expect the RBI to maintain status quo with regard to repo rate on account of domestic and global factors in its bimonthly monetary policy to be announced in the first week of February 2017.