India’s Cash Crisis Slows Down Growth China Overtakes

India’s run as the world’s fastest-growing major economy has ended thanks to its self-imposed cash crisis.

The International Monetary Fund said Monday that India’s economy has fallen back behind its northern neighbor China. India is estimated to have grown at 6.6% in 2016 compared with China’s 6.7%, according to the IMF’s World Economic Outlook.

The IMF has lowered its forecasts for India in the current fiscal year by 1 percentage point, mostly because of “temporary negative consumption shock” from the country’s decision to ban its two largest rupee notes about two months ago.

That decision, announced by Prime Minister Narendra Modi on Nov. 8, was touted as a way to combat corruption and tax evasion. But it also removed 86% of the cash in a largely cash-dependent economy, bringing many parts of it to a grinding halt.

According to government figures, India grew at 7.3% in the quarter that ended in September, before the cash ban. It has now lowered its growth forecasts for the ongoing fiscal year.

via CNN

This article 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 Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza