Note ban pulls down Q3 GDP growth in India to 7%

New Delhi, Feb 28 (IANS) Reflecting the impact of the November 8 demonetisation measure, India's GDP for the third quarter ended December, estimated at Rs 30.28 lakh crore, recorded a growth of 7 per cent, compared with 7.3 per cent in the second quarter, official data showed on Tuesday. Industry said the figures were in line with expectations.

The country had registered a Gross Domestic Product of Rs 28.31 lakh crore in the corresponding quarter of 2015-16.

The estimates of GDP growth for the full fiscal 2016-17 at 7.1 per cent, marked a sharper fall from the 7.9 per cent recorded for the fiscal 2015-16.

In terms of gross value added (GVA) -- considered a better measure of economic performance, as it excludes product taxes and subsidies -- of Rs 28.02 lakh crore for the quarter, the growth at 6.6 per cent was slower compared with 7 per cent in the previous year, mainly due to a contraction in the financial and real estate sectors.

Within the GVA, the manufacturing activity showed a sharp fall in the December quarter at 8.3 per cent, against 12.8 per cent in the same quarter of the previous year.

While construction growth fell to 2.7 per cent, from 3.5 per cent the year before, financial, real estate and professional services GVA during the quarter in consideration saw a massive fall to 3.1 per cent, from 10.4 per cent growth seen in the third quarter of 2015-16.

However, government services, including defence, logged a robust growth of 11.9 per cent, against 7.5 per cent in the previous year.

The primary sector, including agriculture and fisheries, bounced back impressively during the quarter in question with growth of 6 per cent, against a decline of 2.2 per cent in the same quarter of the previous year.

Mining and quarrying output also recorded a major fall at 7.5 per cent, as compared to the 13.3 per cent growth a year ago.

Chief Statistician T.C.A. Anant told reporters after releasing the data that the impact of demonetisation is difficult to assess in the absence of sufficient data.

"Policies such as demonetisation are difficult to assess without a lot of data, a lot of which is still to come in. As of now we have factored in the third quarter figures on industrial production and only the advance filings corporates," Anant said.

"The immediate data bears out the conclusion that it (demonetisation) has not had such an impact," he added.

"Earlier estimates were projecting GDP at much lower level. We have to see the full play of demonetisation effect. Earlier reports were anecdotal," Economic Affairs Secretary Shaktikanta Das told reporters here.

Industry body Assocham said that estimates of GDP are "very much in line with the expectations."

"Estimates put forth by different institutions like the Reserve Bank of India, World Bank and others thereby showing downward movements in the economic activity of India mainly due to withdrawal of specified bank notes," the chamber said.

"Policymakers should take doable steps to revive fixed investments and production of capital goods which are falling continuously since the growth which is being supported by consumption demand does not have sustainable impact," said Assocham President Sandeep Jajodia.

"It is extremely critical to push the domestic capex cycle which has been persistently weak. We are hopeful that going ahead the planned increase in public expenditure, will crowd in private investments," industry body Ficci Secretary General A. Didar Singh said in a statement here.

"We also look forward to a further reduction in lending rates by the banks. This will help boost consumption and prop-up investments through low-cost finance," he added.

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