GDP grows at 7.3% in Q2, uncertainty ahead

NEW DELHI: India has posted the world’s fastest growth rate for a large economy in the September quarter, yet that offered cold comfort after misery inflicted by the government’s shock move to remove high denomination banknotes from circulation.

Gross domestic product (GDP) data released on Wednesday showed Asia’s third-largest economy expanded by 7.3% on year between July and September, faster than a provisional 7.1% growth in the previous quarter.

Farm output grew 3.3% yearon-year during the quarter, faster than 1.8% in the quarter through ARVIND SUBRAMANIAN, CEA June. Manufacturing slowed in the September quarter, posting an annual growth of 7.1% compared with 9.1% in the previous quarter.

India’s growth rate overtook China in 2015 and has stayed ahead, thanks to reforms and stimulus undertaken by Prime Minister Narendra Modi.

But Modi’s decision to scrap 500- and 1,000-rupee banknotes as part of a crackdown on tax dodgers and counterfeiters has removed 86% of the currency in circulation virtually overnight.

The government’s shock therapy has left companies, farmers and households suffering.

Economists agree the economy will take a hit this quarter and for several quarters to follow. But how bad depends on who is talking.

Finance minister Arun Jaitley expects the cash crunch to have a minor impact lasting for a quarter or two. Private economists, however, reckon the impact would be felt through 2018.

The most optimistic forecasts suggest that India will finish this fiscal year in March with a respectable, but slightly lower, growth rate of 7.3%.

Since we are in uncharted water, we need to wait for data and need to put in a lot of analysis before we know the impact.