India’s GDP slowdown does not account for Demonetization

SAN FRANCISCO (Diya TV) — The fears that India’s economic growth could be slowed further have been confirmed by the country’s statistics ministry, and reveal the nation’s GDP growth during 2016-17 is likely to grow a half-percent slower, at 7.1 percent.

According to the ministry’s latest growth estimates, the pace will be impacted by slowing growth in the manufacturing and mining sectors, as well as in the country’s construction activity.

The ministry’s estimates are in line with that of India’s Central Bank and the Reserve Bank of India, which previously pegged GDP growth in the country at 7.1 percent for 12 months ending in March in its last monetary policy report.

However, these reports do not account for impact for the aftereffects of Prime Minister Narendra Modi’s demonetization program, which instantly cancelled 86 percent of the currency the nation had in circulation. The economic impact of demonetization was omitted from the report “in the absence of sufficient information.”

While releasing the data, Chief Statistician T C A Anant said the figures for November were available and examined but “it was felt in view of the policy of demonetization of notes there is a high degree of volatility in these figures and conscious decision was taken not make projection using the November figure.”

According to the latest data released: “The Gross Value Added (GVA) at basic prices for 2016-17 from the mining and quarrying sector is estimated to decline by 1.8 percent, as compared to growth of 7.4 percent in 2015-16.”

The GVA, adjusted at basic prices for fiscal year 2016-17, in the manufacturing sector is expected to grow at a rate of 7.4 percent, a decrease from the 9.3 percent growth figure of 2015-16. The private corporate sector has a share of around 72 percent in the manufacturing sector. Growth in the construction sector is expected to slow, as well, from 3.9 percent in 2015-16 to 2.9 percent in 2016-17.

However, if the impact of demonetization were factored into the numbers, economists believe India’s GDP rate would be much lower — between 5.8 and 6.8 percent for fiscal year 2017.