Demonetisation Trigged World Bank Downgrade to India’s Growth Forecast

The World Bank has downgraded the Indian economy’s growth forecast as sharp falls in the country’s automobile and real estate sales flagged the short-term impact of recalling India’s two most-used bank notes.

The Washington-based financial institution predicted India’s economy would grow by a “still robust” 7% in the fiscal year to March 2017 – a 0.6% drop from its earlier forecast but still the fastest rate of any major economy in the world.

It attributes the fall to November’s decision to recall all 1,000 and 500 rupee currency bills from circulation, a surprise demonetisation move intended to weed out untaxed wealth, hasten the digitisation of India’s economy and disrupt terrorist and other criminal networks.

“Continued tailwinds from low oil prices and solid agricultural output [were] partly offset by challenges associated with the withdrawal of a large volume of currency in circulation and subsequent replacement with new notes,” the World Bank said on Wednesday.

Demonetisation has suffocated the vast informal economy, which employs up to 80% of Indians, but the World Bank said the impact of the policy was likely to be short term. “India is expected to regain its momentum, with growth rising to 7.6% in fiscal year 2018-19 and strengthening to 7.8% in fiscal year 2019-20,” the bank said.

via The Guardian

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.