Cash crunch: Analysts cut India GDP growth forecast

Ratings agencies have cut their estimates of India’s GDP growth in light of the demonetisation of Rs500 and Rs1000 currency notes


The demonetisation move could also dent consumption growth India, which would otherwise have received a boost from a bountiful monsoon. Photo: Mint
The demonetisation move could also dent consumption growth India, which would otherwise have received a boost from a bountiful monsoon. Photo: Mint

Securities houses and rating agencies have cut their estimates of India’s GDP growth in anticipation of temporary headwinds from the 8 November demonetisation of high-value currency notes.

The scrapping of Rs1,000 and Rs500 currency notes, in an attempt to curb black money, has led to a cash deficit as banks struggle to replace the demonetized currency.

The move could also dent consumption growth in Asia’s third-largest economy, which would otherwise have received a boost from a bountiful monsoon. And in the short term, the consumption that would have been fueled by black money will come to a halt.

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