India loses fastest growing economy tag, demonetisation lowered GDP

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Kolkata: The latest economic data released by the Central Statistics Office (CSO) reveals that during the fourth quarter of 2016-17, India’s Gross Domestic Production (GDP) remained at 6.1 per cen only despite its touted growth of 7.1.

“Real GDP at constant (2011-12) prices in Q4 of 2016-17 is estimated at Rs 32.28 lakh crore, as against Rs 30.42 lakh crore in Q4 of 2015-16, showing a growth rate of 6.1 percent,” the data released by CSO states.

The news comes as a dampener for the Narendra Modi government which is celebrating its third anniversary. According to the latest figure, India losses its fastest growing tag to China, which grew at 6.9 during the same quarter—January to March.

Economy experts are holding demonetisation as responsible for this slowdown. In November 2016, Prime Minister of India Narendra Modi, had hurriedly passed the move to demonitise the then existing 1000 and 500 notes.

“The growth numbers reflected the lingering effects in the March quarter of the government’s demonetisation of high-value banknotes with effect from 9 November, which triggered a cash crunch and disrupted businesses, especially in the unorganized sector. The labour-intensive construction sector contracted as a result of the cash shortage and regulatory changes, and financial services grew at an anaemic single-digit pace,” said renowned economist Mohan Guruswamy after the release of fourth quarter data by the CSO.

The economist added, “The distinct downtrend in GDP growth over the four quarters of FY17 suggests that the slowdown in growth that had already set in, had been intensified by the note ban.”

In the fourth quarter, all important sectors, including agriculture, mining, manufacturing, transportation 5.2, 6.4, 5.3, 6.5 grew respectively. But the worst hit was the real estate industry, which only grew at 2.2 per cent and shrank by 3.7 per cent in comparison to the previous year.

The only bright spot remained the public administration and defence which grew at 17 per cent.

Some economists believe that with the implementation of Goods and Services Tax (GST) and because of good expected Monsoon, there may be growth in economy too.

However, analysts are still worrying over India’s uneven growth and ground realities.

The impact of India loosing its position of being fastest growing economy, reflected on stock market as well, as when it opened on Thursday, market trade flat because of lower growth rate.

After the latest economic data went public, economist and author of ‘Restart: the Last Chance for The Indian Economy’ Mihir Sharma tweeted, “Four successive quarters of slowing GDP growth. Can we please here no more paeans to Modi Sarkar economic competence, please?”

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