Millennium Post

GDP data belies claims of note ban impact: Jaitley

Buoyed by higher-than-expected GDP growth, Finance Minister Arun Jaitley on Wednesday said a 7 per cent expansion in third quarter belies exaggerated claims of note ban impact on rural economy.

Jaitley, who returned from his UK visit on Wednesday morning, seemed to agree with RBI Governor Urjit Patel's assertion of a sharp V-shaped recovery as remonetisation picks up.

The October-December quarter of 2016 was "substantially impacted by demonetisation (of higher denomination currency)," the finance minister said. "Demonetisation, admittedly, had led to the squeeze of currency because this was the period during which the replacement of high denomination currencies was taking place and many people were apprehensive to what its impact on overall growth would be," he said.

But, with a 7 per cent growth in gross domestic product (GDP) the worst fears for the economy have been put behind, Jaitley added.

"I had consistently maintained that the revenue figures, which actually show the real level of growth, indicated that the growth was there, and some areas could be adversely impacted, particularly those which were cash dominated and also a part of the shadow economy and even constituted parts of the informal economy," he said.

Figures don't add up, say economists

Government data showing a surprise 7 per cent GDP growth in the October-December quarter has left many economists puzzled who say the figures 'do not add up' and may be "masking" the real impact of demonetisation.

The economists finding the data intriguing include those from public sector giant SBI as well as global majors like Nomura and Bank of America Merrill Lynch.

They believe that the key reason behind such a high growth rate could be "a steep downward revision" of the year-ago base period.

Besides, they said that many companies might have showed their cash in hand as sales, while the official data may have been unable to capture the negative growth effects of demonetisation on the unorganised sectors.

In a report published on Wednesday, Nomura went on to question whether India's growth statistics was "fact or fiction" and said the "official data are underestimating the reality as they rely largely on organised sector data".

SBI Chief Economic Adviser Soumya Kanti Ghosh said the third-quarter estimates, released by the government on Tuesday, was crucial in the sense that it should have given the impact of what happened in the economy during those two months of demonetisation, announced on November 8.
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