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Indian 3Q GDP Grows by 7% Despite Demonetisation

Indian 3Q GDP Grows by 7% Despite Demonetisation

Nick Cawley, Senior Strategist

Talking Points

- Indian 3Q 2016-2017 GDP grew by 7% according to official figures.

- Growth is seen picking up as new notes become more widely available.

- See the DailyFX Economic Calendar and see what live coverage for key event risk impacting FX markets is scheduled for next week on the DailyFX Webinar Calendar.

Third-quarter Indian growth figures shrugged off last November’s demonetisation and grew by 7%, according to official figures from the Indian Ministry of Statistics and Programme Implementation (MOSPI). Although lower than Q2 growth of 7.4%, today’s numbers beat market estimates of 6.0%-6.1% expansion.

The Indian government’s demonetisation program – destroying old 500 and 1,000 rupee notes and replacing them with new 500 and 2,000 rupee notes – was expected to hit the India economy hard. While taking out the most favored black market trader’s notes will help to improve the countries tax base and boost growth, cash flow is important and was expected to be hampered until the new notes are widely available. Analysts at Capital Economics are skeptical about today’s figures, especially after monthly data showed economic activity slowing down at the end of 2016.

“There are widespread doubts about the accuracy of the national accounts numbers, and the unexpected strength of today’s data will do nothing to allay these concerns. Ahost of monthly data, including for vehicle production and rail passenger volumes,suggest that economic activity fell sharply towards the end of last year as a direct resultof the government’s demonetisation measures.”

The Indian government’s chief statistician said today that only advance filings by corporates have been used in Third-quarterestimates, adding that full corporate filing data will not be available until the close of the financial year. This means that full data will not be available until January 2018.

Chart: USD/INR Daily Timeframe (December 2016 – February 2017).

Chart by IG

--- Written by Nick Cawley, Analyst

To contact Nick, email him at

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