India sees 7% growth in next fiscal year

This article is more than 12 months old

Jan 06, 2017 06:00 am

NEW DELHI: India expects growth of around 7 per cent in the first half of the next fiscal year, two officials said. They painted a rosier picture than many economists after the nation's Prime Minister Narendra Modi's shock move to abolish large bank notes.

Nearly 90 per cent of transactions used to be in cash in India, which was gripped by a severe shortage of currency after Mr Modi's Nov 8 decision to take 500- and 1,000-rupee notes out of circulation overnight.

Several private economists have said the move could drag down growth in the next fiscal year, as small businesses fired workers, consumer demand fell and farmers' winter sowing efforts were hit.

ISSUE

Demonetisation has become a major issue in states going to the polls this year, such as Uttar Pradesh, India's most populous state, where the performance of Mr Modi's ruling Bharatiya Janata Party could shape his political future.

The notes, accounting for 86 per cent of cash in circulation, were withdrawn in an effort to crush India's shadow economy but views that the operation was botched have hurt Mr Modi's standing.

Government officials acknowledged that growth in Asia's third-largest economy would still be less than the 7.75 per cent initially projected for the current fiscal year.