GDP to grow at 7.1%; note ban impact not factored in

Krishnanand Tripathi
File photo of a tyre factory in Mumbai.

File photo of a tyre factory in Mumbai.

Indian economy is expected to grow at 7.1% in the current financial year, compared with 7.6% growth recorded in the last fiscal.

This will be the slowest GDP growth in the last three years. Indian economy had expanded at 7.6% in 2015-16 and at 7.2% in 2014-15.

The data released by the CSO has not factored in the impact of demonetisation as the statistics department only took into consideration data available up to the last October. Prime Minister had announced the decision to scrap high value notes of Rs 500 and Rs 1,000 on the 9th November.

Usually, CSO considers data of all three quarters or up to December before releasing its advance estimates for a full financial year.

Chief Statistician T C A Anant said, “It is difficult to talk about the impact of demonetisation at this point of time … at this point the drop (in GDP estimates) is not attributable to any policy change (demonetisation).”

Economists and experts have been repeatedly talking about the adverse impact of note ban, effected on November 9, on GDP in near term including in the current fiscal.

About factoring in the impact of demonetisation, Anant said, “We don’t need to speculate. It (the estimates) is on actual outcome based data. We have not taken bank deposits and credit data for the month of November due to volatility because of major policy change.”

Elaborating the reasons for slowdown, TCA Anant also said that slowdown in economy is by and large on account of (bad performance of) index of industrial production.

Government also defended the forecast made by the CSO. Economic Affairs Secretary Shaktikanta Das said, “Being a statistical organisation, CSO has to go on real statistics and we cannot expect them to go on the basis of impressions and anecdotal evidence.”

According to the latest government estimates released by central statistics office (CSO) on Friday, India’s gross domestic product will be around Rs. 122 lakh crore.

Financial, real estate and professional services and manufacturing sectors are expected to grow faster than 7%.

Agriculture, Forestry and fishing sector is likely to show a growth of 4.1 per cent.

Per capita income during 2016-17 is expected to rise by 10.4 per cent to Rs 1,03,007 compared to last fiscal.

Prime Minister Narendra Modi’s surprise decision to withdraw 85% of currency from circulation to curb black money was expected to hit the economic activity. Various estimates put loss due to demonetisation between 0.5% and 2% of the GDP.