Indian growth set for slowdown, says statistics agency

9 Jan 17

India’s economic growth will slow in the current fiscal year, according to predictions from the country’s statistics agency.


Growth in India, currently seen as the “bright spot” of the global economy, is expected to fall to 7.1% in the fiscal year to March, down from 7.6% in 2015-16. The prediction excludes the volatility caused by the country’s sweeping demonetisation.

Analysts had expected a smaller expansion in the world’s fastest-growing major economy this year as a result of prime minister Narendra Modi’s sudden move to pull India’s highest denomination banknote out of circulation.

The drastic measure – an effort to tackle corruption and tax avoidance – triggered chaos and cash shortages across India and hit the country’s large cash-based economy hard.

But the data released by India’s Central Statistics Office last week does not take the effects of demonetisation into account.

The CSO’s chief statistician T C A Anant explained that the office decided to omit data from November, when demonetisation was announced, and December due to the “high degree of volatility” it contained, according to the Times of India.

But the slower growth rate, which foresees reductions across all economic sectors aside from agriculture, does serve as the first indication of the consequences of the badly managed programme to remove and replace all 500 and 1,000 rupee notes – representing nearly 86% of all currency in circulation in India by value.

Finance minister Arun Jaitley has reportedly dismissed concerns of a slowdown due to the measure. He pointed out that both direct and indirect tax collections have increased in April-December compared to the same period a year earlier.

Direct tax collection is up 12%, while indirect tax receipts saw 25% growth. As well as tackling corruption, it was hoped demonetisation would boost tax collection in a country where only 1% of people are thought to pay.

Jaitley indicated that the tax data not only suggested this had been successful, but that there had also been increases in economic activity.

The CSO’s new figures put its predictions in line with that of the central bank, which also lowered its estimates of India’s growth prospects to 7.1%.

Even if these forecasts hold, India will likely retain its title of world’s fastest-growing major economy. Its main competitor, China, is expected to grow by less than 7% by even the most optimistic estimates. 

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