The Indian economy grew at seven per cent in the December 2016 (Q3) quarter, the slowest in eight quarters. 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 Reserve Bank of India had projected growth rate of 6.9 per cent for FY2017 at its sixth bi-monthly monetary policy meeting early this month.
The first growth rate projection for FY2017 was seven to 7.75 percent.
Read: PM Modi's demonetisation could push India's GDP growth to 20-year low
The economy had expanded at 7.9 per cent in FY2016.
Most analysts had expected GDP growth rate to slowdown in Q3 and also for the full financial year as a result of demonetisation.
The Economic Survey had pegged the FY2017 growth rate in the range of 6.5 to 6.75 percent. "The cash squeeze in the meantime will have significant implications for GDP, reducing 2016-17 growth by ¼ to ½ percentage points compared to the baseline of 7 percent," the Survey, authored by the Chief Economic Adviser, Arvind Subramanian, had said.
The government also revised the growth rate for the second quarter to 7.4 per cent from the earlier 7.3 per cent.
Manufacturing, mining severely hit
The impact on manufacturing sector is expected to be big, as is evident from the fact that it is expected to grow at 7.7 per cent in comparison to 10.6 per cent in the financial year 2015-16. Similarly, growth in the mining sector is projected to slowdown to 1.3 per cent from 12.3 per cent in 2015-16.
Agriculture growth to be robust
The silver lining, so to speak, is in the agriculture sector (agriculture, forestry and fishing), which is projected to grow at 4.4 per cent in FY2017 as against 0.8 per cent in the previous fiscal.
Services sector growth to fall sharply
The two categories of services — hotels, trade, transport and communication — and the other one representing financial services and insurance, are also estimated to post fall when compared to the previous financial year. 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).
The estimates were released by the government of India after stock markets ended trading for the day.
The next set of GDP data comprising March 2017 quarter estimates and annual forecast for FY2017 will be released on May 31, 2017.
