It is true that the effect of demonetization slowed down the growth of India’s economy. But despite huge cash crackdown, India retains top position in growth rate in the world despite. That means in this year, India is the fastest developing country economically, in the world. Financial year will be ended in this march and greater than 7% will be GDP growth rate, what has been exactly expected and calculated in last year’s financial budget.
GDP growth rate of the 1st quarter, from April to June month it was 7.2% and in the 2nd quarter, from July to September it was increased to 7.4%. In 3rd quarter also it was 7% despite the demonetization issue in November and December 2016. Top economists of India thought that GDP growth will be decreased to 6.4%, but it didn’t decrease so much, it was 7%. Even it was greater than China’s 6.8% GDP growth rate. The federal statistics office retained its GDP growth forecast for this fiscal year at 7.1 percent.
The figures surprised top economists, who expected that the economy of India will take a bigger hit from Modi’s demonetization decision in last November to scrap old 500 rupees and 1,000 rupee notes.
The secretary of Economic Affairs department, Shantikant Das said that there was a short-term effect of demonetization on Indian economy. Everyone expected to have a huge effect on GDP growth rate for this demonetization but it’s not true. And it has been proved after observing the rate in last quarter.
Chief investment officer of IDBI Federal Life Insurance Co, Aneesh Srivastava said “Perhaps the data did not include the impact of demonetization. I am stunned and totally surprised to see this figure. I believe that we will see a significant impact on GDP growth rate numbers.”
Obviously, this GDP data of India leaves economists scratching their heads. PM Narendra Modi had received strong criticism for his decision from political leaders and prominent economists such as Amartya Sen and Paul Krugman during the demonetization period in November and Dece,ber-2016. His decision sucked 86% of the currency out of circulation in the market overnight and left many households, companies, and farmers in misery. The BJP government and the Reserve Bank of India (RBI) tolerated all the pain and told that it would be short-lived and predicted a huge economic rebound. The latest GDP growth rate data proved their assessment.
Strong growth rate figures will also increase hopes of further cuts to the interest rate by the central bank, which has been shifted its focus squarely to inflation. People are also hoping for the best about their income, employment, and spending capability, according to this data. And obviously, this will be one of the best examples for Prime Minister Modi to make people understand that BJP is in the right direction of development.