If the results of the recent civic elections in Maharashtra and Odisha are any indication, the Narendra Modi government’s November 8 decision to invalidate all existing Rs 500 and Rs 1,000 denomination notes have had no political impact. But now, it seems the withdrawal of some 86 per cent of currency from circulation has had little effect on economic growth either. Latest quarterly data on national income from the Central Statistics Office (CSO) shows the country’s GDP to have expanded in real terms by 7 per cent during October-December year-on-year. But more interesting is manufacturing and private final consumption expenditure: These have recorded annual growth rates of 8.3 per cent and 10.1 per cent during October-December, as against their respective rates of 6.9 per cent and 5.1 per cent for the previous quarter. In other words, manufacturing and private spending, far from suffering any setback, have registered strong rebound in a quarter where the effects of demonetisation would have been palpable, if at all.
All of this would obviously fly against ground reports of production ceasing in industrial clusters from Ludhiana, Tirupur and Ichalkaranji to Morbi, Agra and Noida, alongside retrenched workers from factories and construction sites returning to their homes in Bihar, Odisha or Bundelkhand. Nor do they square up with other data indicators relating to industrial credit, automobile and two-wheeler sales or residential unit bookings across cities; all of these have registered clear negative growth since November. The CSO data, in fact, render even the government’s own assessment at least until recently — of demonetisation causing a “temporary” blip in a couple of quarters and thereafter leading to a “V-shaped” recovery — irrelevant: If growth has been robust in October-December, why debate the impact of demonetisation?
