December quarter GDP growth slows to 7%

The nations real gross domestic product (GDP) increased at an annual rate of 1.9 percent in the fourth quarter of 2016, according to the "second" estimate released by the Bureau of Economic Analysis on Tuesday.

While the figure exceeds the pace of growth seen during the first half of 2016 it is a marked slowdown from the 3.5 per cent growth recorded during the third quarter.

The increase in personal consumption and expenditures was larger in the second estimate while increases in state and local government spending in nonresidential fixed investment were smaller than the previous estimate.

Quarterly estimates of GDP for the third quarter October-December (Q3), 2016-17 both at constant (2011-12) and current prices along with the corresponding quarterly estimates of expenditure components of GDP were also released. While the former is expected to grow at 7.3 per cent (10.7 per cent in FY2016), the growth in finance, insurance, real estate is projected to come in at 6.5 per cent (10.8 per cent in FY2016). This shows that the impact from demonetisation on growth has been less than expected, and therefore the overall effect on growth for the full year 2016/17 will be limited to that extent. The estimate released by the government on Tuesday (February 28) appeared to have factored in the note-ban decision reflecting in the FY2017 growth projection which was scaled down to 7.1 per cent from the projection at the beginning of the financial year.

The government announced demonetisation or note ban of Rs.500 and Rs.1,000 notes on November 8 midnight to curb black money and terrorism and promote digital transactions.

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The U.S. economy grew at a weak 1.9 percent pace in the final three months of a year ago, although consumers kept up their spending from the more robust third quarter. For 2016-17, GVA growth is seen at 6.7 per cent, down from 7.7 per cent past year.

"As of now, the data which is available has been captured in these estimates", Anant responded. In terms of growth rates, the national income registered a growth rate of 11.6% in 2016-17 as against the previous year's growth rate of 10.2%.

On Feb. 7, Modi defended the demonetization policy in parliament, saying the timing for the move was right as the country's economy was strong.

Commenting on the data, Economic Affairs Secretary Shaktikanta Das said this year growth figures are on a high base of last fiscal and numbers "do not show much negative impact of demonetisation".

  • Darren Santiago