Annual gross domestic product (GDP) growth for the October-December period came in at 7.0 per cent, a tad slower than 7.4 per cent in the previous quarter but much faster than the 6.4 per cent expansion forecast by economists in a Reuters poll. Personal consumption expenditures were revised to a growth rate of 3%, compared with an earlier estimate of 2.5% in the fourth quarter.
"But when I look at third quarter more carefully, half the quarter, including the festive season when spending is high, was gone by the time demonetisation kicked in", he said in reference to the Diwali holiday.
The second advance estimates of National Income, 2016-17, revealed that the growth in the GVA from "manufacturing" sector is estimated to be 7.7 per cent compared to 10.6 per cent in 2015-16. However, growth is expected to rebound to 6.75-7.50% in 2017-18, says the survey authored by the government's chief economic adviser Arvind Subramanian. 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 Central Statistics Office (CSO) put the growth rate for October-December - the quarter in which the government banned 86% of the currency in circulation - at 7%, compared to 7.4% in the second quarter and 7.2% in the first quarter.
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. This reflects poor consumer durables output sales in the last few months.
The other thing to keep in mind is that the impact of demonetisation my reflect in next quarters when the inventories get exhausted and lag disappears.
Agriculture growth has been estimated at 6% in third quarter.
"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", he said in a note to investors.
During the quarter, small firms with sales of less than 1 billion rupees ($14.9 million) "faced the heat of the demonetization drive" as a large proportion of their transactions are conducted in cash and operations were impacted quite markedly, the Indian credit rating agency said.
"Growth is expected to recover in the next financial year".
Real Gross Value Added, i.e, GVA at basic constant prices (2011-12) is anticipated to increase from Rs 104.70 lakh crore in 2015-16 to Rs 111.68 lakh crore in 2016-17.