GDP expected to fall to 6.8 per cent in 2016-17, the World Bank said on Monday.
A modest slowdown is expected in India’s growth with the GDP expected to fall to 6.8 per cent in 2016-17 as a result of temporary disruption caused by the government’s demonetisation initiative, the World Bank said on Monday.
“India’s economy was slowing down in early 2016-17, until the favorable monsoon started lifting the economy, but the recovery was temporarily disrupted by the government’s demonetisation initiative. As a result, a modest slowdown is expected in the GDP growth in 2016-2017 to 6.8 per cent,” World Bank said in its bi-annual India Development Update released here.
“Demonetisation caused an immediate cash crunch, and activity in cash reliant sectors was affected. GDP growth slowed to 7.0 per cent year-on-year during the third quarter of 2016-2017 from 7.3 per cent in the first quarter,” it said.
While limited data is available, demonetisation may have had a disproportionate impact on poorer households, which are more likely to work in construction and informal retail, the report noted.
The report attributes it to coping mechanisms, including greater usage of digital transactions, higher rural incomes, and robust public consumption. The pick-up in rural wages in November and December, 2016, and the growth of agricultural output suggests the positive impact of the monsoons substantially dampened the disruption from demonetisation.
It also said that the country’s growth is expected to recover in 2017-2018 to 7.2 per cent and is projected to gradually increase to 7.7 per cent in 2019-2020.
The World Bank also noted that India remained the fastest growing economy in the world with strong economic fundamentals and ongoing reform momentum.