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7
March 2017
American agency Fitch Ratings on
Tuesday expressed surprise at the official Indian statistician's latest
projection of 7 per cent GDP growth in the third quarter ended December, saying
it contradicted data on real services activity hit by demonetisation.
"This number looks somewhat
surprising as real activity data released since demonetisation pointed to weak
consumption and services activity because these transactions are
cash-intensive. By contrast, official data suggest that private consumption was
strong in October-December (though services output growth moderated quite
substantially)," Fitch said in its latest Global Economic Outlook (GEO)
report.
The Total Investment & Insurance Solutions
The rating agency said that an
explanation for this discrepancy could be the inability of official data to
capture the negative effect of demonetisation on the informal sector.
"However, the formal sector
also remained surprisingly robust. This raises the possibility that these
initial estimates of the growth impact of demonetisation could well be
underestimated, with the possibility of revisions to official GDP data later
on," the report said.
"Fitch now expects Indian GDP
to grow by 7.1 per cent for FY16-17, before picking up to 7.7 per cent in both
FY17-18 and FY18-19," it added. The Total Investment & Insurance
Solutions
The informal sector accounts for an
estimated 45-50 per cent of output in the Indian economy. This data is taken into
account after a lag of one, or sometimes even two, years.
The Central Statistics Office (CSO)
last week estimated that India's GDP for the third quarter ended December, at
Rs 30.28 lakh crore, recorded a growth of 7 per cent, compared with 7.3 per cent
in the previous quarter. The country had registered a GDP of Rs 28.31 lakh
crore in the corresponding quarter of 2015-16. The Total Investment
& Insurance Solutions
The estimates of GDP growth for the
full fiscal 2016-17, at 7.1 per cent, marked a sharper fall from the 7.9 per
cent recorded for the fiscal 2015-16.
This appeared to fly in the face of
previous private surveys documenting the disruption caused by the
demonetisation of Rs 500 and Rs 1,000 rupee notes constituting 86 percent of
currency in November. The Total Investment & Insurance Solutions
Both the Reserve Bank of India (RBI)
and the International Monetary Fund (IMF) have lowered India's growth estimates
for the fiscal by up to 1 per cent, citing the impact of demonetisation.
What surprised economists was that
data for private consumption showed an increase of 10 per cent during the
quarter which felt the maximum impact of demonetisation.
"There are widespread doubts
about the accuracy of the national accounts numbers. The unexpected strength of
today's (GDP) data will do nothing to allay these concerns," Capital Economics
said in a research note. The Total Investment & Insurance Solutions
"Gradual implementation of the
structural reform agenda is expected to contribute to higher growth, as will
higher real disposable income, supported by an almost 24 per cent hike in civil
servants' wages at the state level," the Fitch report said.
It projected India's retail price
inflation to rise to 4.6 per cent in 2017-18 and 5 per cent in 2018-19, from
3.4 percent this year. The Total Investment & Insurance Solutions
"There may still be some
positive impact from the previous accommodative monetary policy stance, but the
Reserve Bank of India signalled in its February meeting that its interest rate
easing cycle had come to an end," it added. The Total Investment
& Insurance Solutions
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