India’s economic growth slowed marginally to 7% in October-December from 7.4% in the previous quarter, government data showed on Tuesday, raising eyebrows among experts and economists.
The Central Statistics Office (CSO) also retained the advanced estimate for 2016-17 at 7.1%, which is lower than 7.9% of 2015-16, but higher than what most economists have predicted in view of the crippling effect that demonetisation has had on consumption and investment.
The Q3 GDP growth estimate beat analysts’ expectation of 6.4%. Some had even projected the growth to slip below 6%.
Analysts point to flaws in the GDP calculations saying it does not factor in the informal sector, which was the worst hit after the government scrapped Rs 500 and Rs 1,000 notes in a surprise announcement on November 8.
The government’s chief statistician TCA Ananth declined to comment on the factors behind the robust estimates for Q3. “We will look for more data to assess the impact of demonetisation,” he said.
While acknowledging that, in the absence of adequate data, it is hard to accurately capture the impact of decisions such as demonetisation, economic affairs secretary Shaktikanta Das said the GDP numbers negate the downward projections made around note ban.
Pessimistic forecasts from analysts and economists leaned on evidence such as the sharp fall in December purchasing managers index (PMI) to less than 50, which indicates a decline in output. Also, car sales slumped and factory output contracted 0.4% in December.
A senior Congress leader and a former minister in the previous UPA government questioned the government’s claim, saying “who believes those numbers”.
“The GDP numbers do not adequately capture the output of the informal sector. So it (Q3 GDP growth) appears to be on the higher side. There is a strong likelihood that the numbers may be revised down later,” said Rupa Rege Nitsure, the Group Chief Economist at L&T Finance Holdings.
Source: Hindustan Times