Growth surprise

Govt numbers show India GDP growth rate at 7% in Q3 and the country is expected to grow at 7.1% for the full year, brushing away demonetisation concerns


Photo: Mint
Photo: Mint

The second advance estimates of gross domestic product (GDP) for the year 2016-17 were keenly awaited as the first advance estimate did not capture the impact of the government’s currency swap initiative—announced on 8 November—on economic activity.

The numbers released by the government on Tuesday showed that the economy expanded at a rate of 7% in the third quarter of the fiscal and is expected to grow at 7.1% for the full year. Even though numbers for previous years have been revised, a preliminary gaze suggests that economic activity was not impacted in any significant manner due to the currency exchange programme in the third quarter. This is also supported by the third quarter results of the corporate sector which have surprised most analysts on the upside.

However, given the full-year estimate, growth in the fourth quarter is likely to come below 7%. The question for economists to ponder: was economic activity impacted more in the fourth quarter than in the third quarter because of currency swap or did it not have any impact whatsoever?

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