Post note ban data not included, 7.1% GDP estimate erroneous: Icra

The advance estimate of 7.1 per cent GDP released by Central Statistical Organisation (CSO), will have major errors as it does not include the data for the months after demonetisation, domestic rating agency Icra has said.

The agency on Friday pegged the expected growth for 2016-17 lower at 6.8 per cent.

“Given the impact of demonetisation on actual activity from mid-November 2016 onward, projecting GDP growth for the full year by extrapolating the trends up to October 2016 for several sectors, may introduce more errors than in earlier years. This would be particularly apt for cash intensive sectors such as construction,” Icra said in a statement.

The advance estimates released by the CSO of growth in FY2017 are unsurprising, as they draw heavily from the available data for the first half of this fiscal, it said. “However, Icra expects GDP (gross domestic product) and GVA (gross value added, which excludes taxes and subsidies) growth for FY2017 at 6.8 per cent and 6.6 per cent respectively, appreciably lower than the advance estimates,” it said.

The CSO pegged the country’s gross domestic product at 7.1 per cent in 2016-17 compared with 7.6 per cent in 2015-16.

The anticipated growth of real GVA in 2016-17 is 7 per cent against 7.2 per cent in 2015-16, according to CSO estimates. 

“The growth in deposits is an outlier, hence November data was not used for the financials,” India’s Chief Statistician T. C. A. Anant had said, implying that demonetisation is not a normal factor in the calculation of annual national income.

Icra said: “Given the unfolding trends, we expect actual FY2017 growth to be lower than the advance estimates for sub-sectors such as manufacturing, agriculture, electricity and construction.”

In contrast, the recent uptick in commodity prices may well result in a somewhat improved GVA performance of the mining sector in H2 FY2017 as compared to the year-on-year decline in the first six months of FY2017, the agency added.

“Moreover, the unavailability of corporate filings for third quarter of FY2017 and second advance estimates of rabi output (as opposed to the available data on sowing), are likely to constrain the accuracy of the advance estimates,” the statement said.

While rabi sowing has grown by a healthy 7 per cent on a subdued base, activity and incomes related to non-crop agricultural sectors including horticulture and livestock may have been adversely impacted by the liquidity crunch, it added.

Meanwhile, an Indian-origin academic and former Singapore diplomat on Saturday said at a conference of leading world universities that Indian economy will grow faster than China despite the temporary slowdown created by demonetisation.

“Even if the demonetisation created a slowdown, it is not going to change the long-term momentum of where India is going with its economic growth,” said Dean Kishore Mahbubani of the Lee Kuan Yew School of Public Policy at the National University of Singapore.

Concluding a three-day conference attended by educators from leading universities from across the world that make up the Association of Professional Schools of International Affairs, Mahbubani said demonetisation is good for Indian economy in the long-term.

“I think demonetisation is a good thing for a lot of (black) money has come back into the economy. That, I think, is good for the economy,” he said.

The Reserve Bank of India will need to borrow less after the cash returns to banks following demonetisation, he said.

“India will grow faster than China even after this (demonetisation) slow down. There is a lot of momentum in the Indian economy,” said Mahbubani.

The conference also discussed changing global trends.

“We are moving from a unipolar world to a multi-polar world which is good for small states because they will have more options,” he said.

“The fact that we are moving towards multi-polar world will create new opportunities for Singapore. We can have good relations with China, United States, India and Europe,” he told reporters on the sidelines of the conference.