India GDP to Slow Less Than Estimated As Cash Returns to Economy

Updated on
  • GDP to expand 7.1% in FY17 vs 7.9% FY16; 6.8% survey estimate
  • Estimates don’t include full set of corporate results

What to Expect From India's Economic Numbers

India’s economy is forecast to slow less than estimated as banks work to replace cash sucked out by Prime Minister Narendra Modi’s shock clampdown in November.

Key Points

  • Gross domestic product will probably grow 7.1 percent in the year through March after a 7.9 percent expansion the previous year, the Statistics Ministry said in a statement in New Delhi on Tuesday 
  • While that’s the slowest pace since 2014, it’s faster than the 6.8 percent median estimate in a Bloomberg survey of 32 economists
  • GDP expanded 7 percent in October-December, compared with 6.1 percent in the survey and the previous quarter’s revised 7.4 percent

Big Picture

The surprising resilience in growth masks job and revenue losses at small companies, which employ as much as 40 percent of the country’s workers and are the secret to India’s growth, according to some economists and lobby groups. Any slowdown therefore carries risks for policy makers, who lack space for fiscal stimulus and who this month signaled an end to monetary easing. The central bank said it expects a sharp rebound in growth after a slump.

Economist Takeaways

  • "We have only advance filings by corporates. These have been incorporated in the estimates," TCA Anant, the government’s chief statistician, told reporters after the data was published. "Full corporate filing data will not be available until the close of the financial year. Full data will be available only by January next year."
  • "This is a positive surprise," said Anjali Verma, economist at Phillip Capital, who had predicted 6.5 percent growth for October-December. "We are expecting the economy to continue growing at 7 percent in the next quarter too." 
  • Consumption probably surged in the period before the cash ban was announced -- Oct. 1 to Nov. 8 -- that hosted two important festivals and crop harvests, said Sunil Kumar Sinha, principal economist at India Ratings and Research. "Clearly these factors have had an equal say in October-December GDP growth as opposed to the adverse impact of demonetization," which will show only in January-March and cut full-year growth to 6.8 percent, he said.


  • Gross value added -- a key input of GDP that strips out taxes and subsidies -- rose 6.6 percent in October-December; that’s slower than the previous quarter’s 7.1 percent but faster than the survey’s 6 percent prediction
  • Full-year GVA is seen rising 6.7 percent compared with 7.8 percent the previous year
  • Private consumption is expected to slow to 7.2 percent from 7.3 percent
  • GDP hasn’t slowed as much as GVA because indirect tax collections rose and subsidies fell, Anant said
  • Gross fixed capital formation -- the creation of productive assets such as factories -- is estimated to slump to 0.6 percent from 6.1 percent
  • Exports are seen rising 2.3 percent compared with a fall of 5.4 percent
  • Among sectors, mining slowed to 1.3 percent from 12.3 percent; manufacturing to 7.7 percent from 10.6 percent; financial services to 6.5 percent from 10.8 percent; agriculture expansion revived to 4.4 percent from 0.8 percent; construction to 3.1 percent from 2.8 percent