Demonetisation ravages Jan-Mar growth to 6.1%

The Modi government had postured that demonetisation had hardly impacted the economy when CSO had forecasted in February that the fourth quarter growth would be 7.1%. But, the final data says otherwise

Photo by Sanchit Khanna/Hindustan Times via Getty Images
Photo by Sanchit Khanna/Hindustan Times via Getty Images

NH Economic Bureau

Contrary to the Narendra Modi government’s posturing that the demonetisation exercise didn’t impact economic growth much, the data released by Central Statistics Office (CSO) on Wednesday revealed that the economic growth had slowed down to 6.1% in the fourth quarter.

The CSO, in February this year, had forecasted the economy would grow at 7.1% for the quarter, as it had downplayed concerns over repercussions of demonetisation on the economy.

The CSO figures further showed that the annual economic growth had slowed to 7.1% in 2016-17, the year in which 87% of the currency was demonetised.

The GDP, as per the new series with base year of 2011-12, had expanded by 8% in 2015-16. It was 7.9% as based on the old series.

The CSO data further revealed that the Gross Value Added (GVA) slipped sharply to 6.6% in the last financial year ended March 31, from 7.9% growth in 2015-16.

The demonetisation seems to have impacted the GVA in the third as well as fourth quarter of 2016-17 which slipped to 6.7% and 5.6% respectively, from 7.3% and 8.7%.

Centre’s claims debunked

The latest figures debunk Narendra Modi Government’s longstanding claim that demonetisation would have a positive effect on the Indian economy. Union Finance Minister Arun Jaitley had said on November 9 last year, a day after Prime Minister Modi announced the demonetisation drive, that the note-ban exercise “will expand the GDP and make (the economy) cleaner.”

“It will push revenue and more money will come into the banking system,” Jaitley had said.

However, the latest figures show that all sectors of the Indian economy but agriculture showed deceleration in the aftermath of demonetisation. A good show by the agriculture sector is largely being attributed to a good monsoon season.

While the manufacturing sector output in the fourth quarter slowed to 5.3% versus 12.7% in the same period of last year, the construction sector slipped into the negative territory.

The agricultural sector posted a huge jump in growth as it expanded by 4.9% during 2016-17 compared to dismal growth of 0.7% in the previous year. It should be noted that the previous two years were hit by droughts, and hence a low growth.

In the fourth quarter itself, the agriculture sector GVA rose by 5.2% as compared to 1.5% in the same period of 2015-16.

The data further said the per capita income during 2016- 17 is estimated to have attained a level of ₹1,03,219 as compared to the estimates for the year 2015-16 of ₹94,130, showing a rise of 9.7%.

With PTI inputs

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