NEW DELHI: India’s economic growth was projected to slow to 7.1 percent this fiscal year in the first indicator of the impact of the government’s recent currency move. The estimate released Friday by the Indian Central Statistics Office for the fiscal year ending March 31 compared to 7.6 percent last year. The estimate is mostly based on data available through October, so likely it does not show the full impact of demonetization, which was announced on Nov. 8.
The GDP growth estimates will be key to India’s preparations to unveil the budget for the next fiscal year on Feb. 1. Normally full-year GDP estimates are released in February and factor in data until the end of December and the budget is announced at the end of February.
Prime Minister Narendra Modi’s surprise move to remove India’s highest-value banknotes, worth 500 and 1,000 rupees, from circulation has wiped out 86 percent of India’s currency. The intent was to fight tax fraud and corruption and push India toward digitization, but has caused massive disruption for the vast majority of India’s people, who earn and spend in cash. Experts have said the move could push GDP growth to below 6.5 percent this year.”As was expected, demonetization has hurt activity across all corners of the economy,” Pranjul Bhandari Chief Economist, India HSBC Securities and Capital Markets (India) Private Limited, said in a research note Thursday.