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.