Tue, Feb 21, 2017 | updated 07:46 PM IST

Demonetisation will result in some uncertainty in third quarter of fiscal 2016-17, says Centre

Updated: Dec 01, 2016 08:45 IST

New Delhi [India], Dec.1 (ANI): India on Wednesday posted the world's fastest growth rate for a large economy in the September quarter, yet said that the nation could experience some amount of uncertainty in the third quarter of fiscal 2016-17 due to the government's decision to demonetise Rs.500 and Rs.1000 currency notes.

Gross domestic product (GDP) clocked an annual 7.3 percent growth between July and September, faster than 7.1 percent in the previous quarter and higher than China's 6.7 percent.

"Normal GDP growth has picked up a fair amount, accelerated from about 10.4 to 12.1. And I think, this is kind of especially good news for private sector. Their balance sheets will be somewhat helped by the fact that normal GDP growth has picked up. I think exports have also at least reversed the decline. There's small increase in exports, so that is also good news," said Chief Economic Adviser Arvind Subramanian.

That impressive headline figure, however, failed to mask the underlying weakness in Asia's third-largest economy. Not only was the overall growth lower than expected, it was primarily driven by consumer and government spending. Contraction in capital investment deepened.

"Investment is down substantially that is something which needs to be watched and also some of the increase in GDP is on the strength of government consumption expenditure," Subramanian said.

Subramanian added that the impact of demonetisation in the third quarter, however, will be subject to a considerable amount of uncertainty.

With Prime Minister Narendra Modi's decision this month to scrap 500 rupee and 1,000 rupee banknotes as part of a crackdown on tax dodgers and counterfeiters denting consumer spending, which makes up 55 percent of India's economy, the outlook for upcoming quarters is not encouraging.

In a country where most people are paid in cash, and buy what they need with cash, Modi's decision has removed 86 percent of the currency in circulation virtually overnight. His shock therapy has left companies, farmers and households suffering.

Economists agree the economy will take a hit this quarter and for several quarters to follow. But opinions on the scale of damage vary widely.

Finance Minister Arun Jaitley expects a minor impact lasting for a quarter or two. Private economists, however, reckon the impact would be felt through 2018.

The most optimistic forecasts suggest that India will finish this fiscal year in March with a respectable, but slightly lower, growth rate of 7.3 percent.

But the most pessimistic forecast, from Mumbai-based brokerage Ambit Capital, is for a precipitous drop to 3.5 percent growth.

Modi has sold the move as an attack on the illicit "black economy", it is also aimed at shrinking the cash economy which has lasted so long because few Indians have bank cards and infrastructure for online transactions is poor.

According to Credit Suisse, more than 90 percent of consumer purchases are made in cash, while another study shows 85 percent of workers are paid in cash.

The crackdown will also have a spillover effect for India's formal economy.

Supply chains at small, medium and even larger companies are already crumbling. Trucks are stranded with no money for fuel, workers won't load goods for free, and distributors can't pay up. Wholesale markets in many cities are shut.

In the wheat-growing states, farmers said they have run out of cash, and as a consequence sales of seeds and fertilizer have plunged halfway through the sowing season.

At least the potential for lower inflation holds out some hope that the Reserve Bank of India will extend its easing cycle with a quick interest rate cut - possibly as early as next month. (ANI)

New Delhi [India], Feb. 21 (ANI):The Ministry of External Affairs (MEA) has asked all chairs and missions to to promote Ayush and Ayurveda, said Minister of State for External Affairs, General V.K. Singh (Retd), at an ASSOCHAM event held in New Delhi today.

Full Story >>

New Delhi [India], Feb.21 (ANI):Louis Taylor, Chief Executive Officer of UK Export Finance (UKEF), is visiting India from 20-23 February. UKEF, the UK's Export Credit Agency, has up to £1 billion in capacity to provide finance to support Indian buyers of British goods, services and intangibles, with support available in Indian Rupees.

Full Story >>

New Delhi [India], Feb. 21 (ANI-BusinessWire India): Herbalife, a global nutrition company, announced its partnership with Special Olympics Bharat (SOB) to support and encourage athletes with intellectual disabilities in India.

Full Story >>

New Delhi [India], Feb. 21 (ANI): After his appointment as the Chairman earlier today, Natarajan Chandrasekaran chaired his first Board Meeting of Tata Sons Limited.

Full Story >>

New Delhi [India], Feb 21 (ANI): Reliance Industries chairman and managing director Mukesh Ambani on Tuesday announced that Reliance Jio, which has achieved unprecedented level of acceptance in the world, has crossed a subscriber base of 100million in record time.

Full Story >>

New Delhi [India], Feb. 21 (ANI-BusinessWireIndia): HCL Infosystems, one of India's Premier IT Services, Distribution and Digital Solutions Company, showcased Cloud and Internet-of-Things (IoT) based solutions at the Future Decoded, Microsoft India's flagship conference, being held in Mumbai on February 21 and 22, 2017.

Full Story >>

New Delhi [India], Feb 21 (ANI): Addressing the media on the progress in making Digital Payments a mass movement in India, CEO Niti Aayog Amitabh Kant said that there are nearly 10 lakh citizens who have so far got reward money of over Rs. 153.5 crore for embracing digital payments.

Full Story >>

New Delhi [India], Feb. 21 (ANI): In the wake of the ongoing BMC Polls in Mumbai, Niranjan Hiranandani, CMD, Hiranandani Communities has encouraged Mumbaikars to exercise their voting rights and feel proud of their city.

Full Story >>

New Delhi [India], Feb. 21 (ANI): India's first healthcare education and training company, Vivo Healthcare is eyeing major expansion across India, South Asia and the Middle East, following fresh strategic funding from Netherlands-based ICCO Investments.

Full Story >>

New Delhi [India], Feb 21 (ANI-BusinessWireIndia): Eminent educationist and psychologist has been bestowed the BBC Knowledge Award for Outstanding Contribution to education at the World Education Awards at Taj Lands End in Bandra by the Minister of Education of Malaysia on 18th February for his mass movement to reduce dropouts and girl education.

Full Story >>

New Delhi [India], Feb. 21 (ANI): Siemens Limited and Siemens Rail Automation Ltd. S.A.U Spain have jointly won an order worth Rs. 287 crore to supply state-of-the-art signaling technology for the first two metro lines of the Nagpur Metro, the North-South and the East-West Corridors.

Full Story >>

New Delhi [India], Feb 21 (ANI-NewsVoir): Samsung, Apple and HTC have emerged as the most successful mobile brands in the first decade of smartphones in India, according to the Mobile Industry Consumer Insight (MICI) Report by CyberMedia (CMR) Research.

Full Story >>

New Delhi [India], Feb 21 (ANI): To commemorate the 25th year of the ASEAN India relations, TEPC (Telecom Equipment and Services Export Promotion Council) organized an inter-ministerial meeting between telecom ministers of ASEAN countries and India in New Delhi today.

Full Story >>

New Delhi [India], Feb. 21 (ANI): The most anticipated Goods and Services Tax (GST) bill, which is most likely to be a game-changer in terms of cost cutting will provide leverage to implement cost cutting mechanisms, thus paving way for consumers to avail Gensets at lower costs, said Sanjeev Nimkar, Vice President, Business Head Kirloskar Oil Engines Ltd., at the launch of their new range of High Horsepower (HHP) Gensets.

Full Story >>

New Delhi [India], Feb. 21 (ANI): After relentless debates have been underway discussing the impact of demonetisation, HDFC Bank Chairman Deepak Parekh on Tuesday stated that it is high time this discussion ended, while casting his vote in Mumbai today in the BMC polls.

Full Story >>

New Delhi [India], Feb. 21 (ANI): Known for its diverse publishing programmes across different disciplines, Oxford University Press (OUP) introduced its medical publishing programme to India.

Full Story >>

New Delhi [India], Feb. 21 (ANI): Excelity Global, India's largest provider of payroll administration, benefits and human capital management, announced its collaboration with Fortis Healthcare, on Monday.

Full Story >>

New Delhi [India], Feb. 21 (ANI): IT solutions provider Infosys retaliated against allegations made in the anonymous whistleblower's letter that was published in newspapers on Monday, stating that the assertions made are libellous and are aimed at tarnishing the image of Infosys and its management.

Full Story >>

Mumbai [India], Feb. 20 (ANI): Tata Consultancy Services (TCS) Ltd on Monday appointed V. Ramakrishnan as the Chief Financial Officer (CFO) of the company.

Full Story >>

Mumbai, [India], Feb. 20 (ANI): Reliance Jio Infocomm Ltd and Uber have announced a strategic partnership aimed at bringing the benefits of Jio Digital Life ecosystem to their users.

Full Story >>