Demonetisation is set to pull down economic growth for FY17. But will its impact be limited or spill over into the future?
The Indian economic outlook is turning hazier by the passing day. A deluge of growth estimates for the current financial year, widely varying and conflicting, has made matters worse. Call it the demonetisation effect, economists and analysts are revising the FY17 growth number downwards.
Early last month, Finance Minister Arun Jaitley's Union Budget 2017-18 only complicated the matter further with its Gross Domestic Product (GDP) estimate for 2016-17. The Budget pegged the nominal GDP (without accounting for the impact of inflation) at Rs 150,75,429 crore. However, weeks earlier, the Central Statistical Organisation (CSO) - the government agency that puts out the growth numbers and other vital statistics - had forecast a higher nominal GDP of Rs 151,92,588 crore.
To be fair, the CSO had made it clear that its advance estimate of FY17 GDP only included data captured between April and October 2016. It was clear that the CSO's estimate did not reflect the developments occurring after the November 8th high currency notes ban. The CSO had to limit the period for data calculation this year as it had to put out the GDP advance estimate a month earlier to facilitate early presentation of the Budget.
In one of its Budget documents, the Union Finance Ministry justified that its GDP estimate is lower than the CSO's "on account of trends of decline in growth rate". Interestingly, it did not mention demonetisation when referring to those declining trends. The Finance Ministry slashed the FY17 nominal GDP growth rate by 90 basis points to 11 percent as against the CSO's estimate of 11.90 percent. (The CSO has pegged the real GDP - accounting for the impact of inflation - growth rate for the current financial year to 7.1 percent.) Despite shying away from attributing the lower growth estimate to demonetisation, the government seems to have made a tacit admission of its adverse impact.
This story is from the March 2017 edition of India Business Journal.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the March 2017 edition of India Business Journal.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber? Sign In
Top Crisis
Short-term, consumer-centric measures have left the tomato, onion and potato farmers struggling to eke out a living.
Boon Or Bane?
With some adequate safeguards, the government's e-assessment scheme can be a win-win situation for both tax department and taxpayers.
Revisiting Development
Sustainable development is the way forward for India, which is in the midst of an economic downturn, ecological crises and stark human distress.
The Cabotage Debate
Relaxation of Cabotage rules has pitted foreign shipping lines against domestic shipping companies.
Catch-22
India finds itself in an unenviable position, as it weighs the pros and cons of joining RCEP.
Accept Mistakes Quickly
Anto Binish Kaspar is a firm believer in technology.
We Will Have 30 Franchisees By 2020
Naresh Sharma , CEO , Skora paints
The Revival Conundrum
Along with a patchwork of band-aids, a smart combination of monetary and fiscal measures can get the ailing economy back into the pink of health.
Mahatma Gandhi @150
The Mahatma firmly advocated that this world has enough for everyone's need but not greed. Gandhian economics, no wonder, cannot be more relevant today in times of erratic economic development, jobless growth and adverse climate changes.
Bitterness Lingers
A hike in subsidy does little to boost exports, thanks to a glut in the global market, and leaves sugar prices subdued in the domestic market.
