Domestic ratings agency Icra today said it expects GDP growth to rise marginally to 7.1 per cent for the fourth quarter on a gradual remonetisation, up from the preceding quarter’s 7 per cent. However, when compared on a year-on-year basis, it will be far slower than the 8.4 per cent registered in January-March 2016.The gross value added (GVA) growth is estimated to come at 6.9 per cent, up from the initial estimate of 6.6 per cent for the preceding December quarter but down from the year-ago’s 8.1 per cent.
The surprising decision to ban all the Rs 500 and Rs 1,000 notes, which accounted for 86 per cent of the currency outstanding, in a cash-based economy is being blamed by many quarters for a dip in GDP growth.
Icra’s principal economist Aditi Nayar said the 6.9 per cent GVA growth for the quarter rests on a 8.8 per cent Y-o-Y growth in services, and a moderate rise of 5.4 per cent and 4 per cent, respectively, in industry and agriculture, forestry and fishing.
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A note from the rating agency said the healthy growth in services is possible on the back of double-digit rise in sub-sectors like air cargo traffic, bank deposits, corporate bonds, commercial paper as well as Centre’s non-interest non-subsidy revenue expenditure.
On impact of the note ban, it said the construction sector will contract by 1 per cent on a GVA basis.
“The new WPI and IIP data, could lead to revisions in GDP and GVA levels and growth rates from FY2013 onward, at constant prices,” she said, adding the growth rate for FY17 will “differ materially” from the second advance estimates released by the CSO in February 2017.
“Some additional data on the impact of the note ban on the informal sectors may result in a sharper dip in growth in H2 FY2017, relative to the revised levels for H1 FY2017,” she said.