Note Ban Effect : India loses Fastest Growing Economy, GDP growth Slows to 6.1% in Q4 2016-17

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The government proposes to reduce the cash transaction limit to Rs2 lakh from Rs3 lakh as announced in Budget 2017 in an amendment to the finance bill (File Photo)

India’s economy grew 6.1% in the Q4 (January to March) of 2017, Government data released on Wednesday. In the previous quarter it was 7% in the Q3 (October to December) of 2016  i.e. GDP grew 6.1% in Q4 2017 while 7% in Q3 2016.

The government proposes to reduce the cash transaction limit to Rs2 lakh from Rs3 lakh as announced in Budget 2017 in an amendment to the finance bill (File Photo)

India’s GDP grew 7.1% for the full year (2016-17 ) compared to a revised growth figure of 8 per cent in FY16 as reported.

Revision of the base year have even failed to boost the GDP numbers.

Government revised the base year for index of industrial production (IIP) including the wholesale price index (WPI) but this attempt seems failed to boost India’s economic growth. We are no more fastest growing economy.

India lost the crown of Fastest Growing Economy to China.

Going by the fourth quarter figure, India has lost the tag of fastest-growing economy since China’s GDP grew at 6.9 percent in the comparable quarter.

Demonetisation & Disappointment for Modi Government after loosing on providing employment.

The disappointing growth numbers indicates that demonetisation had finally impacted the GDP numbers. This is going to add another pain to the government after loosing out on the front of providing employment.

“Q4 data is definitely disappointing and clearly reflects some amount of extreme impact from demonetisation. Based on the quarterly numbers, we can expect a strong commentary from the central bank (RBI) in their next policy meet,” Tirthankar Patnaik, India strategist, Mizuho Bank said.

“The lower-than-anticipated fourth quarter GDP number reflects the lingering impact of demonetisation,” Yes Bank’s chief economist Shubada Rao said

Every sectors have been hit hard by the demonetisation except Agriculture. 

Despite agriculture has been given less importance over other sectors and farmers suicide rate is still a big concern but agriculture have come to rescue the dropping figure otherwise GDP number could fall below 6%.

Sectors                                               Q4 2017     Q4 2016

  • Manufacturing                                5.3%           12.7%
  • Mining                                              6.4%           10.5%
  • Financial Services                          2.2%           9%
  • Construction                                   3.7 %          6%
  • Trade, Hotels and Transport       6.5%          12.8%
  • Agriculture                                      5.2%           1.5%
  • Public Administration                  17%             6.7%
  • Defence                                            17%             6.7%
  • Forestry and fishing sectors        5.2%           N.A.
  • Quarrying                                        6.4%           N.A.
  • Electricity, Gas, Water supply    6.1%            N.A.
  • Including Utility Services            6.1%            N.A.
  • Communication                             6.5%           N.A.
  • Real Estate                                      2.2%           N.A.
  • Professional Services                    2.2%           N.A.

Even dismal numbers were reported for full year.

  • Manufacturing reported 7.9 percent as against 10.8 percent in 2015-16.
  • Mining reported 1.8 percent as against 10.5 percent in 2015-16.
  • Construction  1.7 percent as against 5 percent in 2015-16.
  • Agriculture 4.9 percent as against 0.7 percent in 2015-16.

“The most significant imbalance in India’s growth story is the paucity of job creation. The demographic ‘dividend’ is slowly turning into a ‘tax’ as more young people enter the workforce, while the pace of job creation is meagre. It is critical that policy makers focus on a more equitable distribution of growth for the long-term socio-political stability of the country,” said Varun Khandelwal, managing director, Bullero Capital.

Crediting demonetisation for UP Election Win by the BJP

Actually last GDP figures announced before the UP Elections was much better than the most analysts have had estimated i.e. 7%. Though analysts were seems divided on the figures, some says demonetisation had impacted the GDP but real estimates will show in Q4. Read report by HT including 5 reasons to doubt Q3 GDP numbers.

BJP had articulated that Q3 GDP higher numbers in their favor and perception were gleaned that demonetisation bucks the hype as reported by LV

Political analysts are now recalling the lines phrased by BJP Members who were crediting the demonetisation for UP Election Mandate.

BJP’s UP Win Shows People’s Endorsement of Demonetisation : Jaitley (As reported by News18)

BJP win in states a stamp of approval on demonetisation : Amit Shah (As reported by IE)

Source : FP, BS & Scroll

Photo Credit : TheWire

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