India’s growth likely to slow to 6.5% due to demonetisation: Deutsche Bank report

"We expect growth to be impacted adversely in the present and next quarters due to the government's temporary de-monetisation initiative," said the Deutsche note.

By: PTI | New Delhi | Published:November 25, 2016 4:13 pm
Deutsche bank, demonetisation, demonetisation Deutsche bank, Deutsche bank report demonetisation, demonetisation india, india growth rate demonetisation, india news Demonetisation: People exchange their old Rs 500 and 1000 notes at a SBI branch in New Delhi. (Source: PTI Photo)

India’s real GDP growth is expected to slow to 6.5 per cent in the current fiscal on the likely impact of demonetisation, while muted inflation may open room for additional rate cuts, says a Deutsche Bank report. According to the global financial services major, economic growth will see a moderation in the near term and would gradually recover to 7.5 per cent in the next financial year. Prime Minister Narendra Modi on November 8 had announced the demonetisation of Rs 500 and Rs 1,000 notes, thereby withdrawing 86 per cent or Rs 14 lakh crore worth currency from circulation.

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“We expect growth to be impacted adversely in the present and next quarters due to the government’s temporary de-monetisation initiative,” said the note, adding that GDP will slow to 6.5 per cent in 2016-17, and gradually recover to 7.5 per cent in 2017-18. According to the report, the government is expected to increase public spending from the next fiscal year to offset the likely lingering impact of a slower growth in the informal economy. Moreover, the RBI is also likely to keep monetary policy accommodative for a prolonged period, which will help private consumption to recover once again in the next fiscal year, especially in the second half.

“This could help push up FY18 real GDP growth to about 7.5 per cent, with the recovery likely to be more back-ended,” Deutsche Bank added. The global brokerage expects CPI inflation to average under 5 per cent both in 2016-17 and 2017-18, opening up considerable additional room for rate cuts. “Given the growth-inflation outlook, we have pencilled in 25 bps cut at the 7th December meeting and another additional 50 bps rate cut for the next year. We expect the RBI to cut rates in February (post the Union Budget) and in April (annual policy meeting) by 25 bps each,” the report said.

The Monetary Policy Committee headed by RBI Governor Urjit Patel last month cut benchmark interest rates by 0.25 per cent to 6.25 per cent. The next RBI policy review is on December 7.

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  1. D
    DILIP
    Nov 27, 2016 at 4:16 pm
    STOP SPINNING VITRIOL, THERE WILL BE A SHORT TERM IMPACT ON GDP GROWTH, BUT WITHIN 6 MONTHS GDP WILL REBOUND STRONGLY TO OVER 8%.NO NEED TO CURRY FAVOUR THE PROBLEM OUT OF PROPORTION. INDIA'S ECONOMY IS VERY RESILIENT.
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    1. D
      DILIP
      Nov 27, 2016 at 9:10 pm
      You are a communist ignorant buffoon and your understanding of economics is well below that of an illiterate DONKEY. You should go back to school kutta comrade and learn some logic and economics. I repeat the impact will be short term and growth will re bound, ch00t.
      Reply
      1. M
        Mahender Goriganti
        Nov 27, 2016 at 7:47 pm
        May be may be not. Growth GDP etc is academic and statistical gimmicks created by western / Capitalist neocolonialist to promote debt driven consumerist economies at the cost environment and destruction of this earth. India China were the most advanced countries on earth until so called industrial revolution survived more than 10000 years with large potions. with limited space. lt;br/gt;US is a clic example that capitalism and neocolonialism. America 5 times size of India, with less than 10 crore potion (at 1901) in less than 100 years has not only producing gt;50% pollution and consuming gt; 50% world resources, destro Virgin land looted from Native Americans with its barbarianism and consumerism for sake of it.and material hording culture. Ex. If India and china were to bury all humans and take up 4x5 foot land for all its dead there would not have been an inch of land left to live.. Yet another issue with Abraham (Jew, Muslim Christian) culture
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        1. R
          Richard Nicholas
          Nov 25, 2016 at 11:09 am
          Read what the world bank has done to India, हटा दिया है। अब भारत लोअर मिडिल इनकम कैटेगरी में गिना जाएगा। भारत नए बंटवारे के बाद जांबिया, घाना, ग्‍वाटेमाला, पाकिस्‍तान, बांग्‍लादेश और श्रीलंका जैसे देशों की श्रेणी में आ गया है। सबसे ी बात यह है कि ब्रिक्‍स देशों में भारत को छोड़कर चीन, रूस, दक्षिण अफ्रीका और ब्राजील अपर मिडिल इनकम श्रेणी में आते हैं। अभी तक लो और मिडिल इनकम वाले देशों को विकासशील और हाई इनकम वाले देशों को विकसित देशों में गिना जाता रहा है। वर्ल्‍ड बैंक ने अर्थव्‍यवस्‍था के बंटवारें की श्रेणियों के नामों में परिर्वतन किया है। वर्ल्‍ड बैंक के डाटा साइंटिस्‍ट तारिक खोखर ने बताया, ”हमारे वर्ल्‍ड डवलपमेंट इंेटर्स पब्लिकेशन में हमने लो और मिडिल इनकम वाले देशों को विकासशील देशों के साथ रखना बंद कर दिया है। विश्‍लेषणात्‍मक उद्देश्‍य से भारत को लोअर मिडिल इनकम अर्थव्‍यवस्‍था में रखा जा रहा है। हमारे सामान्‍य कामकाज में हम विकासशील देश की टर्म को नहीं बदल रहे हैं। लेकिन जब स्‍पेशलाइज्‍ड डाटा देंगे तो देशों की सूक्ष्‍म श्रेणी का प्रयोग करेंगे।lt;br/gt;Now the German Bank! What's happening PM ji?
          Reply