The government sharply revised the GDP growth estimates for the last two financial years, resulting in a 7.2% expansion in 2017-18 and an 8.2% acceleration in economic activity in 2016-17 — making the year of demonetisation the fastest growing fiscal since 2010-11.
The numbers for 2016-17 surprised economists as there was widespread belief that demonetisation slowed down the economy significantly. With quarterly estimates for the year unavailable, analysts were unable to get a fix on the numbers.
Another economist suggested that CSO may have over-estimated the extent of economic activity in the informal sector, which is seen to have borne the brunt of the Modi government’s decision to scrap the old Rs.500 and Rs.1,000 notes.
Government officials said the impact of demonetisation was not felt so significantly up to December, when the old currency could still be used for several transactions.
The economy took a hit in the March-quarter as well as the June-quarter, when the effect of de-stocking ahead of GST launch added to the pressure, according to government officials.
Based on the gross value added, at constant prices, the sharpest revision was seen in case of agriculture, real estate, transport, other services and construction, which some of the economists suggested did not tally with the reports post-demonetisation.
Policymakers have been ecstatic that India has maintained its position as the fastest growing major economy in the world as growth in China is expected to moderate.
Typically, GDP numbers undergo three four revisions from the time preliminary advance estimates are released. The Central Statistics Office said that the revision for 2016-17 was based on updated estimates of production and prices on the farm and industrial sector, revised spending and tax data for the Centre and the states, corporate performance numbers as well as the latest statistics on the financial sector.