According to the IMF’s update to its World Economic Outlook, India’s growth in 2016-17 is likely to slow to 6.6% from the previous estimate of 7.6% because of demonetisation, costing it the tag of the world’s fastest growing major economy. The World Bank, meanwhile, pegged India’s 2016-17 growth at 7% last week. And the Central Statistics Office went for 7.1% for the financial year—admittedly using data only through October, before the currency swap move in November.
There are two takeaways from this. The first is best summed up by quoting Alan Greenspan: “We really can’t forecast all that well, and yet we pretend that we can, but we really can’t.” The second is that the discrepancies in the various forecasts notwithstanding, the currency swap has undoubtedly hit the economy in the short term—even if the exact contours and quantum of it are debated, and will remain so until all the data are in. The burden of addressing the damage means that come 1 February, Arun Jaitley will present the Narendra Modi government’s most important budget yet.