Post-demonetisation slow down in GDP

MUMBAI India's annual economic growth slowed to 7.0 percent in the three months through December from a revised 7.4 percent expansion in the previous quarter, but it was much stronger than expected, government data showed on Tuesday.

With regard to global growth, Moody's said continuing cyclical recovery in global economic activity with growth in G-20 countries picking up modestly to 3 per cent in 2017 and 2018 from 2.6 per cent in 2016, but potential shifts in usa policy add uncertainty to this forecast.

The Central Statistics Office (CSO) has retained the growth projection for the current fiscal at 7.1 per cent, as projected in the first advance estimate in January. "We still remain a 7 per cent-plus GDP country", said Economic Affairs Secretary Shaktikanta Das.

Little surprise, then, that Tuesday's robust GDP figures have left economists dazed, and have also raised fresh doubts about the quality of India's official economic data reporting.

The PFCE and GFCF at constant (2011-12) prices in Q3 of 2016-17 are estimated at Rs. 17.78 lakh crore and Rs. 8.80 lakh crore, respectively.




The GVA was announced at 6.6% Vs 7.1% (QoQ) Vs 6.9% (YoY). However, in the fourth quarter investment added 150 bps to GDP, an encouraging sign for the United States' economy heading into 2017. "The growth in GDP during 2016-17 is estimated at 7.1 per cent as compared to the growth rate of 7.9 per cent in 2015-16".

Personal consumption expenditures: Increased by 1.9%, down slightly from last estimate's 2%.

There was just a temporary impact of demonetisation, which is over now. "We expect the Fed to err on the side of caution and tolerate somewhat above-target inflation in the near term".

This estimate is based on a more complete set of data than was available in the advanced estimate last month, but held steady at 1.9%. On the currency crunch impacting growth in fourth quarter of this fiscal and subsequently, Panagariya said, "Currency shortages which have impacted the transaction would be addressed by the beginning of the fourth quarter". For the full year of 2016-17, the GVA is 6.7% compared to 7.7% a year earlier. Similarly, growth in the mining sector is projected to slowdown to 1.3 per cent from 12.3 per cent in 2015-16. This trend would make it appear as if demonetisation had no impact on economic activity, which is not supported by anecdotal evidence."The revised figures have revealed that growth in H1 FY2017, prior to the note ban, was sharply lower than what the earlier estimates had indicated".

(Copyright © 2015. All Rights Reserved.)
 
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