India’s economic growth will see a “significant fall” in the second half of the current fiscal on account of cash crunch following demonetisation, industry body CII said on Thursday. As far as corporates earnings are concerned, the consumer goods sector has seen sales drop by 20 per cent in the last month, CII President Naushad Forbes said.
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“There is no doubt that in this quarter and the next there will be a significant fall in GDP growth,” Forbes told reporters when asked about the impact of demonetisation on economic growth.
The government had last month suddenly scrapped high value Rs 500 and Rs 1,000 notes in its bid to flush out black money leading to cash crunch in the economy as infusion of new currency in the system has been very slow.
On whether demonetisation has led to job losses, Forbes said there has been a negative impact on jobs in the informal sector which relies on cash payments to workers.
The Reserve Bank of India earlier this month cut the economy’s expansion forecast for 2016-17 to 7.1 per cent, from 7.6 per cent earlier, saying that short-term disruption in economic activity and demand compression arising out of demonetisation have led to downside risks to growth.
India remained the fastest growing major economy with its GDP accelerating to 7.3 per cent in the July-September quarter, pushed mainly by farm output, although the momentum is expected to be hit in the coming months by the impact of demonetisation.
The Gross Domestic Product (GDP) or national income which rose from 7.1 per cent in the previous quarter is however lower than 7.6 per cent recorded in the same period last year.