India's annual economic growth slows to 7 percent in December quarter

The government will release GDP growth numbers for the December quarter on Tuesday providing clues on how the economy has responded to the government decision to outlaw high-value banknotes in November
Demonetisation pulls down India's GDP growth to 7 per cent in Q3
Author

01 March, 2017

Data released by the Central Statistics Office (CSO) on Tuesday showed that the rate of economic growth in the three months ending December slowed marginally from the 7.4 per cent in the preceding quarter.

Accordingly, Moody's has revised its real GDP growth forecast to 2.4 per cent in 2017 and 2.5 per cent in 2018, from 2.2 per cent and 2.1 per cent, respectively.

CSO is not alone. Analysts had expected a 6.4-6.7 percent growth rate due to demonetization which was announced by Narendra Modi to curb black money in the economy. The RBI and other agencies had lowered GDP projections arguing that the note ban would have short-term impact on the Indian economy.

Care Ratings chief economist Madan Sabnavis sees growth to slow as much as 5.4% in Q3 and to 6.75% for full fiscal year 2016-17, as note ban dampened activity in manufacturing as well as services sectors. Anticipated growth of real GVA at basic prices in 2016-17 is 6.7 per cent against 7.8 per cent in 2015-16. Moving in sync was the International Monetary Fund (IMF) which saw the economy growing at 6.6 per cent - significantly lower than its initial estimate of 7.6 per cent.

The U.S. economy grew at a weak 1.9 percent pace in the final three months of past year, although consumers kept up their spending from the more robust third quarter.

"There are widespread doubts about the accuracy of the national accounts numbers, and the unexpected strength of today's data will do nothing to allay these concerns", he said in a note to investors.

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The per capita net national income (current price) during 2016-17 is estimated to be Rs1,03,818 showing a rise of 10.2 per cent compared to Rs94,178 during 2015-16 with the growth rate of 8.9 per cent. Since the recession ended in mid-2009, annual growth has averaged 2.1 percent, the worst performance for any recovery in the post-World War II period.

The GDP estimate released Tuesday is based on more complete source data than were available for the "advance" estimate issued last month.

"Growth is expected to recover in the next financial year".

Quarterly estimates of GDP for the third quarter October-December (Q3), 2016-17 both at constant (2011-12) and current prices along with the corresponding quarterly estimates of expenditure components of GDP were also released.

Ficci Secretary General Didar Singh said with the second advance estimate for 2016-17 at 7.1%, the data belies the widespread expectation of sub 7.0% growth this fiscal year.


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