Despite the demonetization that made Indian people rush to the bank even after having good money and status, Indian economy is improving performance in manufacturing and services, a Reuters poll of economists found.
Still, fastest growing economy in the world last quarter, private-public has played the vital role to restore economy as fast as after demonetization. Modi’s ban of high-value currency notes last year had a major short-term impact on demand.
The economy went upscale to 7.1 percent annually in the first three months of this year which was predicted to be in 6.5 to 7.8 percent range: Median Forecast from a poll of 35 economists. Annual growth was 7.0 percent in the quarter ending December, and 7.9 percent in the January-March quarter last year.
“The demonetization drive barely impacted the economic momentum in the second half of FY’17. Most of the high-frequency indicators showed only a marginal slowdown and were quick to recover,” said Tushar Arora, senior economist at HDFC Bank.
Despite 1.5% forecasted in India’s industrial sector, 2.7% growth was measured in March from a year earlier. Factory and services activity expanded for most of the first quarter of 2017, rising to a five-month high in March, indicating the effects from demonetization were short lived.
Apart from this, if monsoon goes well as expected as stated by IMD, agriculture output and infrastructure spending will kick-start to growth higher than expected. Moreover, GST will eliminate the multiple state sales taxes which will ease the business for small-scale people.
“The GST will boost Indian GDP at least by 100-150 basis points. It won’t happen right after July 1, but probably by the end of FY18,” said Karan Mehrishi, lead economist at SMERA Ratings Limited.