ICRA forecasts 6.6% GVA growth for India in FY16-17

The economic activity will take longer to restore after note ban.

The Dollar Business Bureau 

It is estimated that India’s gross value added growth will stand at 6.6 per cent in 2016-17 as the economy gets on the path of normalisation post the move of demonetisation taken by the government, rating agency ICRA has said.

According to the findings, it will take longer for economic activity to be restored but the currency liquidity is expected to improve by January 2017. It is in the backdrop of this scenario that figures have been revised for the GVA growth.

It has been noticed that the pace of economic activity will be dependent on the replenishment of currency in the fourth quarter and digital transactions becoming more widespread.

The public was issued as many as Rs 5.9 lakh crore banknotes through the banking system between November 10 and December 19. The figures have been shared by the Reserve Bank and reflect 38 per cent of the value of currency that ceased to be legal tender.

“The loss of income in some sectors and deferral of consumption are likely to weigh on capacity utilisation in the second half of 2016-17, delaying capacity expansion plans,” the report said.

It is important for the cash to be released at this pace along with the proportion of fresh notes remaining same that currency liquidity will reach the desired level in January 2017 before the budget is released.

It seems that there are high chances of the government to incur capital spending with only around half of the budgeted target completed in the first seven months of this fiscal, thus giving ambiguity about the improvement in the pace of spending.

The Dollar Business Bureau - Dec 26, 2016 12:00 IST