This Article is From Nov 30, 2016

GDP Rises At 7.3% In September Quarter But Cash Crunch Clouds Future Outlook

GDP Rises At 7.3% In September Quarter But Cash Crunch Clouds Future Outlook

Many economists have revised lower their GDP target for the year after demonetisation

Highlights

  • GDP growth rose to 7.3 per cent in September quarter
  • Economists polled by NDTV Profit estimated growth at 7.5 per cent in Q2
  • Demonetisation will likely dent growth in coming quarters
India's economic growth picked up steam in the July-September quarter on strong consumption demand, but Prime Minister Narendra Modi's surprise currency crackdown earlier this month will likely dent growth in coming quarters.

Gross domestic product or GDP growth rose to 7.3 per cent in September quarter, accelerating from 7.1 per cent in the previous quarter. In comparison, economists polled by NDTV Profit estimated the September quarter growth at 7.5 per cent. The GDP data released today for September quarter does not reflect the impact to the economy from demonetisation.

Analysts say that the Seventh Pay Commission awards helped support domestic demand in the September quarter.

However, the shock move on November 8 to withdraw 500 and 1,000 rupee notes is likely to slow growth in coming months, say economists, thus pulling down overall growth for the full fiscal year (April to March). CMIE, an economic think tank, reckons that demonetisation would cost at least $19 billion by the end of 2016 in foregone wages, lost business, and higher administrative expenses alone.

After demonetisation, many global financial services firms, from Fitch to Goldman Sachs, have revised lower their growth target for Indian economy to below 7 per cent for the year to March 2017, from last year's 7.6 per cent. In perhaps the most pessimistic forecast, Ambit Capital estimates full-year GDP growth at 3.5 per cent, not ruling out even a contraction in the October-December quarter.

During the September quarter, agricultural sector, boosted by good monsoon, recorded a strong growth of 3.3 per cent.

However, manufacturing growth slowed down to 7.1 per cent in September quarter, from 9.1 per cent in the previous quarter.
 
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