India Posts 7% Growth Despite Cash Crisis

India’s cash crisis has taken a surprisingly small bite out of its economic growth.

The country’s gross domestic product grew by 7% in the quarter ended December, according to figures released by the government on Tuesday. That’s slower than the 7.4% expansion posted in the previous quarter, but a much better result than most analysts had forecast.

Economists had expected a sharp slowdown to result from Prime Minister Narendra Modi’s abrupt decision to ban on all 500 and 1000 rupee notes — the two largest denominations — in early November. The shock move immediately took 86% of the country’s cash out circulation, hitting key sectors of the economy.

The GDP results mean that India has retained its title as the world’s fastest growing major economy. Its rival China posted growth of only 6.8% over the same quarter.
But economists quickly raised doubts over the official government data — the accuracy of which has been questioned in the past.

“The strong figures confound survey data pointing to a larger drop in economic activity that appears to have persisted into 2017,” wrote analysts at Fathom Consulting.

Analysts had predicted that India’s growth would decline by as much as one percentage point in the two quarters after the cash ban, with institutions like the IMF and even India’s own central bank revising their forecasts downward.

via CNN

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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