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Crisil lowers India’s GDP forecast by 1% to 6.9% for 2016-17
Dec-02-2016

Global ratings agency, Crisil has lowered India’s Gross Domestic Product (GDP) growth forecast by 1 percent to 6.9 percent for 2016-17 from 7.9 percent forecasted earlier, saying economic recovery from demonetisation will take at least a couple of months, translating into a GDP growth of 6.6 percent for the second half, compared with 7.2 percent in the first half. At the same time, Crisil also said that the jolt to demand will also pull inflation down thus, it expects the consumer price index (CPI)-based inflation to print lower at 4.7 percent as compared to its earlier estimation of 5 percent.

The ratings agency said that the pain of demonetisation will be frontloaded and the benefits will be felt over a period of time. It also said that uncertainty coupled with a fall in consumption demand and inventory build-up, will push back recovery in private corporate investments. Additionally, it said that the problem gets compounded because of a preponderance of cash transactions in the humongous informal sector, which cannot be accurately measured or monitored.

Further talking on government's demonetisation move, Crisil said that the problem is, the infusion of replacement notes has been very sluggish and the ensuing cash choke has pulled back the business cycle, which was beginning to accelerate on the back of a good monsoon, the seventh pay commission pay hike, and the one rank one pension scheme for veterans. It added that the cash crunch will impact private consumption demand (55 per cent of GDP) directly, and cull GDP growth in the third and fourth quarters of the current fiscal.


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