In its first report after November’s demonetisation, the World Bank has lowered the India’s GDP growth estimate for this fiscal to 7 percent, from its earlier estimate of 7.6 percent made in June last year.
“The immediate withdrawal of a large volume of currency in circulation and subsequent replacement with new notes announced by the government in November contributed to slowing growth in 2016,” the World Bank said in its latest report.
“Weak industrial production and manufacturing and services purchasing managers` indexes further suggest a setback to activity in the fourth quarter of FY 2017,” it added.
The World Bank, however, asserted that the country would regain momentum in the following years with 7.6 and 7.8 percent growth. “India is expected to regain its momentum, with growth rising to 7.6 percent in Fiscal Year(FY) 2018 and strengthening to 7.8 percent in FY 2019-20,” the Bank said, adding that various reform initiatives are expected to unlock domestic supply bottlenecks and raise productivity.
Notably, India maintains the distinction of being the fastest growing emerging market economies of the world, bypassing China.
Last week, India`s official statistician in New Delhi also lowered the country`s gross domestic product growth estimates for 2016-17 to 7.1 percent, compared with the 7.6 percent growth in 2015-16.
While announcing its monetary policy review last month, the Reserve Bank of India acknowledged the demonetisation factor and lowered their gross value added (GVA) growth estimates for the current fiscal to 7.1 percent from the 7.6 percent forecast earlier.
On November 8, Prime Minister Narendra Modi announced the demonetisation of Rs 1,000 and Rs 500 notes, saying the move was aimed to eliminate black money, counterfeit currency and terror financing.