India, Effects of Rupee ban: Economic growth drops from 8% to 6.1%
Data released by the Central Statistical Office. The economic crisis refers to January-March 2017. The collapse of the construction industry and financial services. For 2018 perhaps a recovery around 7.6-7.8%.
New Delhi (AsiaNews) – The ban on 500 and 1,000 rupee notes has meant that in the last quarter of this year, January-March 2017, Indian growth was just 6.1%. The figure points to a real collapse compared to last year's estimates, when it was expected to increase by eight percentage points.
On May 31 the Central Statistical Office (CFO) stalled the economic expectations of the country, which in recent years had become the protagonist of the most rampant growths in the world, even higher than that of China.
The data is in line with the downturn forecast after the banknotes were removed from circulation last November, which forced the Delhi government to reformulate the budget expenditure for the current year. The quarter-on-quarter result, which corresponds to the fourth quarter of fiscal year 2016-2017, leads the total growth of the Indian economy from 7.5% to 7.1%, as economists had already speculated.
The sectors that suffered the greatest damage were those of construction and financial services. Construction activity contracted by 3.7%, up from 3.4% in the previous quarter (October-December 2016); Financial services, real estate agencies and private professionals grew by only 2.2%, down from 3.3% in the previous quarter. On the contrary, the areas where growth is greatest are those of agriculture and public spending.
According to Ernst & Young analyst D K Srivastava, "these sectors were generally stable and robust, but they were negatively affected by the demonetization" (the term by which Narendra Modi's economic initiative is known in India). For the expert, "it will take at least another quarter, before the impact will be completely absorbed."
More cautious analysts warn of the easy equation between the economic crisis and the consequence of the ban on rupees. Among these, Tant Anant, secretary of the National Statistical Commission (NSC) of India and the Ministry of Statistics and Program Implementation. He believes that "determining what policy specification - in the network of policies - has direct effects on growth is a complex task."
Madan Sabnavis, head of Care Ratings economists, envisages an economic growth of around 7.6-7.8% for the fiscal year 2018. This could be the result of the development of the agricultural sector, the good monsoon season, an increase in consumption, the private sector and public spending, especially in the field of infrastructure.